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February 26, 1993
Ho-hum. New lows. The last time mortgage rates were this low, Richard Nixon was still in office, and Spiro Agnew had not yet resigned. How time flies.
Thirty year Treasury yields hit 6.82%, the lowest ever (of course, the Treasury didn't sell thirty year paper until the 1970's).
The economy is much stronger than thought: the October-December Gross Domestic Product has been revised to a 4.8% gain from 3.8%. That's the best three-month performance in five years. Why is it that we need more stimulus spending?
Alan Greenspan had a big week last week.
At the State of the Union speech he was seated between Hillary Rodham Clinton and Tipper Gore. Trapped, he was, between Ms. Scylla and Mme. Charybdis, lashed to his chair to resist the Sirens' call (my apologies to Homer).
Can you imagine Paul Volcker exchanging whispers with Nancy Reagan?
His other command performance was before Congress. Missing the story entirely, the news media trumpeted his praise for the Clinton budget.
The man was there to tell Congress (and anyone else listening) that the Fed intends to maintain an iron grip on money growth, and has not the slightest intention of accomodating the free money needs of Bill and Hillary.
The exalted Congresspersons seemed not to notice, but Mr. Greenspan announced plans for the slowest rate of money growth since maybe 1960.
The real genius in Slick Alan's pitch was his "praise" for the president's program. Here is what he really said.
Regarding the fiscal stimulus package: "You certainly can't argue -- at least I can't -- that it is something which would have a significant impact on the economy."
Regarding spending cuts: "If one is looking at the probability of a sustained reduction in the deficit, the probability is higher if it is done from the expenditure side than from the tax side."
In his quiet, eliptical way, he made clear his preference for spending cuts over tax increases, his concern that new revenue would be consumed by new spending, and his belief in the irrelevance of the proposed fiscal stimulus.
But he had no need to pick a fight with the president, or show the central banker's traditional contempt for political expedient.
He focused, as did the bond market, on the benefit of genuine deficit reduction -- no matter what kind. Mortgage rates are down on this hope, and so are all the chips.
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