Griftopia: Bubble Machines, Vampire Squids, and the Long Con That Is Breaking America

by Matt Taibbi

Here we have to pause briefly to explain something about these rate cuts. When the Fed cuts the funds rate, it affects interest rates across the board. So when Greenspan cut rates for five consecutive years, it caused rates for bank savings, CDs, commercial bonds, and T-bills to drop as well. Now all of a sudden you have a massive number of baby boomers approaching retirement age, and they see that all the billions they have tied up in CDs, money market funds, and other nest-egg investments are losing yields. Meanwhile Wall Street was taking that five consecutive years of easy money and investing it in stocks to lay the foundation for Greenspan’s first bubble, the stock market mania of the nineties. Baby boomers and institutional investors like pension funds and unions were presented with a simple choice: get into the rising yields of the stock market or stick with the declining yields of safer investments and get hammered. As economist Brian Wesbury puts it, it was as if Greenspan was holding up a green light, inviting people to rush into the equity markets.