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There are a handful of events one remembers like they “just happened yesterday.”  9/11 is tops on the list – as I was there; as well as the Reagan assassination attempt, Magic Johnson announcing he had the HIV virus, and the Rangers winning the Stanley Cup.  From a financial standpoint, the day Alan Greenspan suggested markets were displaying “Irrational Exuberance” is right up there with the Enron collapse, the AIG bailout, and the May 2010 “flash crash.”

The date was December 5, 1996; and I was working as a buy-side analyst/trader at a midtown Manhattan hedge fund.  The Dow had been rising for five years; with a trajectory starting to “hockey stock” higher…

dow-1990-2000

Greenspan was appointed Fed Chairman in August 1987, just two months before the infamous October crash.  In its aftermath, he learned the POWER of lowering interest rates; taking the Fed Funds rate from 10% to 3% – and subsequently, watching the Dow surge from 2,000 to 6,000.  Five years of loose money had created a MASSIVE equity surge – which continued even as he increased Fed Funds to 5%…

fed-funds-rate-1987-1996

The internet mania was borne of this easy money era; as was the banking Cartel, when Bill Clinton plucked Robert Rubin from Goldman Sachs to become Secretary Treasury in December 1995.  Immediately thereafter, Rubin first uttered the fateful words “strong dollar policy” – ushering in the “new Gold Cartel,” and out America’s Fort Knox, West Point, and Denver reserves…

Big Deficit Bob Rubin and the Strong Dollar

Animal spirits burgeoned due to an improving – albeit, credit-driven – expansion.  Thus, “Maestro” Greenspan, for the first and only time since Paul Volcker in 1980, “jawboned” the market by hinting it might be exhibiting “irrational exuberance.”  The market fell for a few moments; but ended the day higher – and didn’t stop until it CRASHED in 2000.

Greenspan NEVER made another peep about Irrational Exuberance (the now-powerful banking Cartel made sure of that); as the Dow nearly doubled from 1996 to 2000.  And once the second major CRASH of his tenure occurred, he doubled down his MONEY PRINTING efforts.  Better yet, he fostered every manner of destructive banking practice possible – as immortalized by the following quotes; about ADJUSTABLE-RATE MORTGAGES…

Indeed, recent research within the Federal Reserve suggests that many homeowners might have saved tens of thousands of dollars had they held adjustable-rate mortgages rather than fixed-rate mortgages during the past decade, though this would not have been the case, of course, had interest rates trended sharply upward.

-February 2004

…SUBPRIME LENDING…

Improvements in lending practices driven by information technology have enabled lenders to reach out to households with previously unrecognized borrowing capacities.

-October 2004

…and last but not least, OVER-THE-COUNTER DERIVATIVES…

The use of a growing array of derivatives and the related application of more-sophisticated approaches to measuring and managing risk are key factors underpinning the greater resilience of our largest financial institutions …. Derivatives have permitted the unbundling of financial risks.

-May 2005

From 2000 to 2004, he took Fed Funds down to 1%; enabling the bankers – who simultaneously turned the “SINGLE-CELLED OPTION” into a derivatives behemoth; consequently, creating a new set of BUBBLES; this time, in equities and real estate…

fed-funds-rate-2000-2006

…which promptly CRASHED in 2008; leaving his protégé – “Helicopter Ben” – to clean up the wreckage.  Of course, fiat currency is a PONZI SCHEME by definition; and thus, Bennie’s ONLY course of action was to PRINT MORE MONEY.  And thus, the “final easing cycle” commenced – to NEVER end…

fed-funds-rate-2006-2013

Today, I would hardly call today’s RIGGED markets “Irrational Exuberant”; given ALL-TIME LOW retail participation, volume, and volatility.  Let alone, an abysmal economy; wherein even “cooked” government data showed flat GDP growth last quarter.  Heck, even the BANKERS are bearish…

Bank of America: “Today’s Stock Market Has Lost Some of Its Ability to Reflect Underlying Economic Trends”

Debt, deficits, inflation, and entitlements are EXPLODING; while real estate is dramatically weaker than when Bernanke took office.  The “DOW JONES PROPAGANDA AVERAGE” has been goosed to “all-time highs” (excluding inflation and survivor bias); while simultaneously plunging relative to REAL MONEY – despite the most RELENTLESS PM suppression in HISTORY…

dow-gold-ratio-2000-present

But have no fear; “Sir Alan” is back from the dead, to tell us – yet again – to buy stocks…

Greenspan: No ‘Irrational Exuberance’ in Stocks Now

For the record, I blame Greenspan MORE THAN ANY OTHER ON EARTH for the FINANCIAL ARMAGEDDON we all face.  Sure, Nixon abandoned the gold standard; but he was just a pawn in the game.  And like I said, Bernanke was left with the ultimate “Hobson’s Choice.”  In the big picture, it was a “team effort” between Washington, Wall Street, and the MSM; but “THE IRRATIONAL MAESTRO” was clearly its ringleader…

Is Greenspan Sealing the Market’s Fate?

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