It was 10 years ago tonight that Mr. Greenspan let the phrase slip. (In a nice touch of irony, it came in a speech before the American Enterprise Institute — home to the two writers who in 1999 penned DOW 36,000: The New Strategy for Profiting from the Coming Rise in the Stock Market.) Mr. Greenspan was talking about stocks, of course, but since then, writers have invoked his phrase to describe excesses in everything from hog bellies to Treasury bonds. A search on Factiva for news media mentions of “irrational exuberance” returns 23,131 articles. “Rational exuberance” (clever, that!) returns 776 articles. Talk about excess. The chairman himself some years later, in a Congressional Q&A session following testimony, referred to the speech as “turgid,” musing that the rest of his remarks likely caused people to fall asleep.
But here's what really caught my eye on this post; the Fed Funds rate was exactly the same then as now - 5.25%. The Fed has changed the rate 40 times since then, but one can't help but wonder if we wouldn't have been better off if they had just left it alone for the last 10 years. I suspect the answer is yes.