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The Cracks in Clinton's Economy

by J. Orlin Grabbe

The Director of the CIA didn't like my post "The Phosphorous- Headed Missile and TWA Flight 800." He called up a person he assumed was my source and accused him of two things: 1) Educating the general public; and 2) Threatening to bring down the value of airline stocks.

We can safely assume, then, that the Director 1) Believes in keeping the public ignorant about the current risks of air travel; and 2) Owns airline stocks.

However, if you believe that airline stocks should rationally reflect all available information, then such stocks *should* decline in value because of increased risk to passengers and increased insurance costs.

But we are dealing in a government that believes the stock market should reflect only information they want to make available. Perhaps that is why the Federal Reserve has been intervening in the stock market. They apparently forgot to inform anyone about their new mandate. Or is it just that Mr. Alan Greenspan wants to keep the market looking healthy enough to ensure the re-election of Bill Clinton?

The Federal Reserve was a heavy buyer of stock on July 16, when the Dow Jones Industrial average was down 165 points, following the previous day's decline of 165 points. This gives a new twist to the notion of "too much money chasing too few stocks."

But such intervention will not work in the long run. Unless, of course, Mr. Greenspan wishes to end up owning a good bit of corporate American. Would an ex-fan of Ayn Rand really want a socialist outcome like that?

We see the travesty of government-supported banks in the case of the French bank Credit Lyonnais, whose troubles I reported well in advance. Credit Lyonnais is (or was until now) the largest bank in the world outside of Japan. Be looking for a fire sale on a good proportion of Credit Lyonnais' U.S. real estate holdings.

August 27, 1996
Web Page: http://www.aci.net/kalliste/