Maestro — Chapter 12

1. 1. Greenspan warned Congress about unsustainable stock market gains, saying caution is warranted due to the sharp rise in equity prices.
2. 2. Fed Governor Laurence Meyer publicly endorsed the Phillips Curve and NAIRU, signaling more rate hikes, which moved markets.
3. 3. Greenspan convinced Meyer that productivity growth could allow low unemployment without inflation, swaying him from his models.
4. 4. The FOMC raised the fed funds rate by 1/4 percent in March 1997, with expectations of more hikes, but inflation was actually falling.
5. 5. The March rate hike contributed to a sell-off in Thailand, triggering an Asian financial crisis that spread to South Korea.
6. 6. Greenspan and Rubin decided not to use the Exchange Stabilization Fund for Thailand, saving it for a bigger crisis.
7. 7. Greenspan believed new technology had a punishing downside: financial disturbances could transmit swiftly around the world.
8. 8. Greenspan used his regulatory power to pressure banks into a voluntary standstill on Korean loans, avoiding default.
9. 9. Greenspan's contradictory public messages in fall 1997 contributed to a 554-point Dow drop on October 27.