Re: Neglected prophets!

["ÁÎ×Ó¹â HenryC.K.Liu ¹ù¤l¥ú" <hliu@xxxxxxxxxxxxxx>]

Paul Davidson wrote:

> In an article entitled "The Dangers of Debt Reduction" on the editorial page
> of the March 3, 1999 WALL STREET JOURNAL, Professor James Galbraith and I
> wrote "The promised buy-down of the government's own debt, poses another set
> of dangers. U.S. government bonds are a safe asset, completely free of
> default risk. Their vast abundance are stabilizing elements in world finance.
> Take them away and... private investors will be forced to seek safety in
> hedging, which tends to destabilize financial markets".
>
> The same theme has suddenly been discovered in a major article in the
> February 17, 2000 issue of The New York Times entitled "Shrinking Treasury
> Debt Creates Uncertain World". The Times reports that with the U.S.
> repurchasing Treasury bonds "...the debt securities that remain in the
> shrinking market are expected to be much more prone to wild swings in price
> and therefore riskier to investors".
>
> It took the New York Times almost a year to discover what was obvious to
> Galbraith and myself.
>

Not only that, the NYT did not mention either of you in its late report.

Also, the big question is when will Greenspan/Summers get the message? Perhaps
Paul, you should write both of them a letter before we all have to pay for
their complacency.

Greenspan, as you know, loves hedging on the basis that it stimulates growth.
Henry