Nov 19, 2004


I interpret Greenspan as tying together the recent comments of Fed officials regarding higher rates with his own views on the deficit. He has always been very outspoken about his desire to see the Gov't cut spending and even when he advocated tax cuts he did it because he did not trust the Gov't to keep spending under control in the face of a surplus.

I don't think many people were looking for a conflict between monetary policy and fiscal policy where the Fed attempts to reign in the debt but that seems where we are heading. This should shake things up in all markets but mostly thru interest rates. Corporate bonds seem particularly vulnerable in here with historically tight spreads and historically low yields.

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