Re: Volatility

["Harry Veeder" <veed0001@xxxxxxxxxxxxxxxx>]

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>From: "?ë× Ð? Henry C.K.Liu  Ðé?l¸ç" <hliu@xxxxxxxxxxxxxx>
>To: POST-KEYNESIAN THOUGHT <pkt@xxxxxxxxxxxxxxxx>
>Subject: Re: Volatility
>Date: Sun, Apr 2, 2000, 2:19 am
>

>Let me add the following news items to Geoffrey Gardiner's excellent post.

<snip>

>Item: NEW YORK (Reuters) - It's the fallout from the exploding new economy.
>Federal Reserve Chairman Alan Greenspan is operating under the guise that he's not
>a destroyer of stock market wealth but rather a preserver of economic health.
>
>The critics disagree. They say the Fed chief has gained the dangerous reputation
>of being a player in the market rather than just a referee.
>
>And the fear is that there's nothing to stop Greenspan, who is obsessed over high
>stock prices, from converting his irrational exuberance speech of 1996 into
>action.
>
>Greenspan believes the antidote for dealing with a runaway market is to raise
>interest rates, which implies that the central banker has lots of experience in
>managing unruly markets.
>
>Interest rates have so far been raised five times since last June, each by a
>modest quarter percentage point. But the monetary tightening has not caught Wall
>Street's attention.
>
>Stocks are still in overdrive and the economy is buzzing along. And investors are
>looking at those rate increases in their rear-view mirrors as just annoying bumps
>in the road.
<snip>

Why does nobody (in government) ever consider taxation as an instrument of
stock market regulation? A system of stock market taxes would be effective
if they used the speed of electronic feedback rather than relying on the
speed of human (eg. the FED) feedback. Such taxes could deflate "bubbles"
before they "burst".

Harry Veeder