How Ben saved Goldilocks
Bernanke cut the US Fed Funds rate by 0.5 percentage points last Tuesday, scaring off the bears and taking stock markets across the world to new heights, writes Manas Chakravarty.Updated: Sep 22, 2007, 23:14 IST
Once upon a time, in the early years of the twenty first century, there lived a girl called Goldilocks. From an early age, Goldilocks had acquired the art of sniffing out the dens of the bears that inhabited Wall Street, sneak into them when the bears were out and polish off their porridge. But the story of her sleeping in their beds is a foul canard put out by her detractors. Goldilocks would never sleep with bears, it just wasn’t her nature.
That’s because she was the illegitimate offspring of Alan Greenspan, the former chairman of the US Federal Reserve, who disliked bears with all his heart and soul. Rumour has it that Alan was engaged in a passionate discussion one day on lowering interest rates with a pretty co-ed when one thing led to another and, nine months later, Goldilocks made her way into the world. It was her dad who trained her in the fine art of stealing the bears’ breakfasts.
With such an education, it was no wonder that Goldilocks did well for herself and she was soon the toast of Wall Street. Why, they even named the global economy after her: they called it the Goldilocks economy. And when the bears on Wall Street dwindled greatly in number, Goldilocks learnt how to sell structured investment vehicles and collateralised debt obligations to buyers at fat commissions. Of course she had no idea what they were and nor did her buyers, but nobody gave a damn as long as their prices went up.
And then, one black day, the bears came back. It turned out that all those things that Goldilocks was selling had little time bombs in them, planted by the bears. They were, in the famous words of one of their leaders, Warren Buffet, financial weapons of mass destruction. There came a day when these bombs started to go off all over the world, wrecking havoc on Goldilocks’ friends. As usual, she ran to papa. “Do something, dad,” she pleaded. “It’s getting really scary out there. Why, it’s fast getting to the point where I won’t be able to afford a diamond every week. And diamonds, as you know, are a girl’s best friend.”
But alas, Alan Greenspan had retired and he no longer had the power to print money at will to give to his daughter. What’s more, he was engaged in writing his memoirs, The Age of Turbulence, and he was a bit uncertain about helping Goldilocks, who, he hinted, was actually the product of an immaculate conception. Thus it was that our heroine had to tearfully return empty-handed from the meeting.
Meanwhile, young Ben Bernanke, the current chairman of the Fed, had for long been a silent admirer of Goldilocks. He was also jealous of Alan and of the great bubble that he had created in the stockmarkets. He spared no time in rushing to Goldilocks’ aid. As she cried softly on his shoulder, Ben was all attention. When she reached the point about having to give up her million-dollar bonuses, Ben knew he had to act at once to save her from a fate worse than death. And that is why, friends, Bernanke cut the US Fed Funds rate by 0.5 percentage points last Tuesday, scaring off the bears and taking stock markets across the world to new heights.
That historic night, after the deed was done, Ben relaxed at his home. He felt on top of the world. He basked in the warm glow of Goldilocks’ admiration. But there were two important tasks he needed to do. The first was to write a letter. “Dear Alan,” he wrote, gazing with satisfaction at the rising market charts, “my bubble is bigger than yours.” The second task was to begin his memoirs. What would he call it? He furrowed his brow a bit, chewed the end of his pencil and then wrote, in big bold capitals: ‘THE AGE OF FLATULENCE.'