PRESTOPUNDIT

Double Bubble. "Rare is the economy that transitions from recession to recovery and, ultimately, to expansion without an attendant rise in interest rates. And yet 27 months into the current recovery, that’s very much the state of affairs in the United States. The Federal Reserve is the key actor in this drama. Borrowing a page from the script of the New Paradigm of the late 1990s, the Fed continues to hold the view that monetary tightening need not interfere with the rapid growth of a productivity-led economy. But the prescription of low nominal interest rates introduces a new dimension of financial market risk into the equation -- the possibility of multiple asset bubbles. In an effort to spark debate over the wisdom of this policy strategy, the following “open letter” to Alan Greenspan appeared in the March 1, 2004, issue of Newsweek International .. " more from the CHIEF ECONOMIST of MORGAN STANLEY.