Remember Y2K? What a horrible hype fest that computer issue turned out to be. We spent good money converting systems over and doing hard work, but things went smoothly. A lot of people still went out and had fun that New Year's Eve. One group of people was really scared by the potential calamities of the Y2K changeover. That group was Larry Summers, Alan Greenspan and Robert Rubin. Those three were the committee that saved the world, so they should have been aware of the efforts and status reports explaining that the switch would be smooth. They were scared. They made a move that was, in their eyes, precautionary and best for the nation and Y2K. It was convenient cover and a total lie. Greenspan, Rubin and Larry Summers goosed the markets with liquidity and set the blow off top in the NASDAQ, creating the post-bubble wasteland that Greenspan responded to with a massive credit bubble.
Greenspan ordered an additional $50 billion in different denominations of currency to be printed on top of the $150 billion scheduled to be printed in 1999. This currency was shipped to banks all over America. The money stayed out there in the banking system used to goose the markets. The US markets experienced a blow off top that they still have yet to recover from when adjusted for inflation. The NASDAQ was the major recipient of this liquidity and the leveraged action on that cash injection. Over the next 12 months (mid '99- mid '00), the NASDAQ moved in a near vertical direction. More venture capital money was sucked into the tech sector, that capital was incinerated quickly (sent to money heaven), and the VC investment dollars have never fully recovered. One could then argue that the blow off equity bubble and all of those bad loans and investments became the foundation for Greenspan to lower rates for multiple years, paper over losses by the banks and spark the entire post-2000 credit bubble. It would be interesting to find out discover how much that final blow off top unloaded stocks from banks to retail and how strong Rubin's and Summers' desire to delay a recession until after November of 2000 was.
Why did three senior government (connected) officials fear Y2K when the government was saying the switch would be smooth? Why did they print $50 billion? Why was the emergency cash not returned or destroyed? Taken at face value, would scares like this cause Summers to pull similar shenanigans in the future? What events might spark a preemptive printing? Where did the money go? Why did leadership at Treasury/FED miss the stock market bubble of the late '90s (*hands up* whocoodanode?) and actively provoked it with this $50 bil injection in '99 instead of preventing it? If Summers is nominated for the FED, can one Senator please ask him about this specific episode? Maybe a journalist could ask about this episode instead of saying that he's so smart that smart people are "Larry-smart"? Who knows what else about the bubble policies of the '90s may come out with such a brusque figure who has no concept of inner monologue speaking before Congress? He's randomly stated that he doesn't see why there would be a cap to total debt one entity could assume. This is just one small episode of Summers' time at the helm of the US Treasury, yet it had huge secondary and tertiary effects... and no one brings this up. I think Summers is the pick, but dread the thought of it (what if Summers/Yellen both stalking horses for Rubin/Bernanke approaches?). Hopefully, he blows himself up at a confirmation hearing. The media could help set the table by shining lights on his odd policy decisions and ideas since the last faithful readers of the Wapo are our politicians. Let's review past policy instead of writing puff pieces about Summers' IQ, glass ceilings or the presence or lack of a vagina for each candidate.