Jewish World Review April 26, 2004 / 5 Iyar, 5764

Neil Cavuto

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Ignore that man behind the curtain! | Interest rates already are moving up. Yet we worry what Alan thinks.

Mortgage rates already are inching up. And we fret over what Alan will do. Inflation, we know, is percolating again. Yet we find ourselves obsessing anew over Alan . . . again.

I say, stop it.

Alan Greenspan is a smart guy. Last time I checked, he was still human.

He's not Oz. But we treat him like Oz.

Please, I beg you — I beg all of us — look behind that curtain. And get off that yellow brick road. He's just a man, as flawed as you and I are at making economic hunches and financial bets.

Don't get me wrong. Alan is an honorable and decent fellow, but when it comes to blazing paths, let's just say Alan isn't a ring-leading fellow. He responds to events. He doesn't determine events.

Take a look at interest rates. So many experts are convinced Alan and his Federal Reserve buddies are poised to hike them, and maybe soon. I say, who cares? They're moving up regardless of what he or those knuckleheads sitting around that big table do.

Here's the dirty little secret that's getting lost: the Fed doesn't control market interest rates. As the name implies, the market does. And the market long ago determined that with the steady spate of improving economic numbers, it was only a matter of time before inflation would become more of an issue.

I'm not even saying "bad" inflation, just inflation. I'm talking about prices going higher, not even a lot higher, but enough to raise eyebrows and concerns. Clearly the markets figured that interest rates at 40-year lows were unsustainable in an economy that's starting to percolate.

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That's not a bad thing — it's a good thing. Our economy is improving. Businesses are starting to see more flexibility in their prices, and clearly OPEC itself has seen flexibility in its market . . . just look at gasoline!

My point here is not to bash Al, but to point out what's really going on.

Let's say the guy does eventually start hiking rates. He isn't leading a trend, he's following it. He's continuing to do what the markets have already been doing for him — recognizing the strength in the economy by pushing up interest rates to reflect that strength in the economy.

Remember, Al doesn't determine fixed mortgage rates, the markets do. And fixed mortgage rates are mostly based on something called the 10-year Treasury note. That note has backed up close to half a point in little more than half a month . . . and again, all without the Fed so much as having a conference call.

Al responds to what is, not what will be. He will hike rates. I'm not smart enough to say when, but I am smart enough to say he will. I don't base that on what I think, but on the history I've seen.

Al reacted to an economic slowdown years ago by cutting interest rates too late; just like he reacted to an economic boom by raising them too late. Let's just say Al likes to wait to see all the data, to make sure he's not doing something drastic. That's probably good analytical common sense. It's just that it's also conservative and tepid, and cautious, very, very cautious.

I'm not saying that Al isn't a remarkable fellow. I'm sure he is. I'm just convinced he's not as remarkable as some have made him out to be. We fret too much over his every word. I read his every act. And history tells me his decisions are neither bold nor awe-inspiring. That doesn't make Al "Oz." That makes us . . . cowardly.

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Neil Cavuto is managing editor of Business News at FOX News Channel. He is also the host of "Your World with Neil Cavuto" and "Cavuto on Business." Comment by clicking here.


04/19/04: Sorry for not being sorry
04/11/04: Dying . . . to live
04/02/04: The rude CEO
03/30/04: Shut up, move on, watch out!
03/22/04: LET HIM LOOSE!
03/15/04: FREE MARTHA! (Kinda)
03/08/04: Al, how do we love thee?
03/01/04: ISN'T THAT RICH?!
02/23/04: The real issue on tax cuts
02/17/04: Let Atkins rest in peace!
02/15/04: The smallest slight, the biggest headache
02/09/04: Sign it, send it, be done with it!
02/02/04: What a pain in the class!
01/26/04: Pundits punt it
01/19/04: What's wrong with having a temper?
01/12/04: When the applause stops
01/05/04: 2003 — The year of the optimist
12/22/03: Nothing succeeds . . . like success
12/15/03: When the boss takes your call
12/08/03: The day I realized my daughter had grown up
12/01/03: Let's give thank$
11/24/03: Camelot . . . not
11/17/03: Cordially speaking, I hate you!
11/03/03: I can't "wait" to get back at you!
10/27/03: What would we die to know?
10/20/03: Smile while you work
10/13/03: Dull man walking: Why Gray was too gray
10/05/03: Who says we're so depressed?
09/29/03: Thanks, but no thanks
09/22/03: Big Companies vs. Big Government
09/15/03: Terrorists and idiots: Financial lessons learned
09/08/03: Watch out, Mr. President
09/03/03: Tips for Empty Nesters
08/25/03: Friends and hypocrites
08/18/03: When good news goes bad
08/04/03: PHONY BALONEY!
07/28/03: The meaning of a pin
07/21/03: We are what we eat
07/14/03: Don't like it, don't keep it!
07/07/03: The check, and the recovery, is in the mail!
06/29/03: Who says Al's our pal?
06/23/03: The big pitch for the "big get," no big deal!

© 2003, Neil Cavuto