Irrational Exuberance

In 1996, when the then Federal Reserve Chair, Alan Greenspan coined the phrase “Irrational Exuberance”, it troubled folks but also incorrectly forecast a precipitous drop in the markets. It took another three years.

It doesn’t take a Federal Reserve Chair to see it again, and it will not take three more years for the markets to drop like a lead balloon. In fact, it’s hard to believe that any serious investor watching Donald Trump’s early moves, especially those decimating key international trade pacts, would not immediately bail out and take refuge in insured cash accounts, and perhaps some gold and diamonds too.

We surely are fooling ourselves, believing that lower corporate taxes and fewer restrictions will boost the economy and lead us all down the road to riches. Cooler heads can look beyond the hype and realize that constraints on manufacturing lower cost goods abroad and on selling worldwide thanks to multinational trade agreements represent the bulwarks of our 21 Century economy. Withdrawing inside our borders will kill our economy.

We are decidedly blinded by irrational exuberance.

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