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Former BB&T CEO John Allison on the anniversary of Black Monday and the state of the markets today.
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To former BB a decent.
Person who was president of that bank 25 years ago today on the very real warning signs it can happen.
-- -- -- -- -- -- -- -- -- -- -- -- -- But what do you make -- -- and now and everyone says you know let's agent history when he sent.
Good afternoon -- right to be with you let me try to -- a little context I take a minute because I was.
President Habibie -- during that that correction in his.
Important people understand exactly what happens.
-- correction didn't happen filed a short term thing it happened -- long term.
Phenomena really start with Johnson back in the sixties when he wanted to have a war on poverty and the Vietnam War and he didn't wanna taxpayer would have -- after the -- start -- money.
That continue the 1970s.
Which result in massive inflation.
The theater had to correct the mess it had made it raised -- prime rate 81% that created a severe economic correction in a follow in the market.
In a -- was a good correction though shortened claim because the government didn't do any thing and it was startled some really solid real -- Alan Greenspan however who was in new here the -- really arbitrarily decided that real growth with the -- -- thing.
-- misconstrued and thought it was inflation he -- arbitrary -- an intra.
-- -- which it is -- inaugurated cycle repeated just to bring people back who aren't as old as you and I that.
Group Alan Greenspan just take it over the Federal Reserve Ronald Reagan was president the time -- you would still brought up a point -- thought his support and often missed in history.
That Ronald Reagan's response to that crisis.
Was essentially don't go overboard with big -- -- an expensive fixes that he did the famous query I would when asked about the bit of the fall off.
I think -- -- on the view that markets go up -- markets go down -- -- in other words don't.
Don't you make a mountain out of what could be.
Comparatively a -- and overdo it setting up of an express so they kept it decides circuit breakers and curbs and that's -- -- -- kind of limited to that.
Not cynics and critics have morals say well.
That set up.
Scandals and everything else but it really do think you eat eat get the government out of screwing up something that you that they would only make worse -- -- Absolutely because the market needed to correct resources needed to be allocated we were -- allocate resource -- calls an inflation.
And they needed to be reality that's while we start having real growth when the government permits markets from clearing.
Is win we don't have real growth whom struggle like we do today.
And here's the analogy with today Bernanke's been print money like crazy now for four years.
The stock market is reflecting the expectation that somehow interest rates will stay -- So p.s are vulnerable particularly in tech stocks are happy stocks.
If we actually -- get some growth in the fit is faced with rising interest rates the market is vulnerable.
But the real vulnerabilities in the long term bond market with a -- is arbitrarily -- -- and the long into the market.
Has our next Bobble head and as you and I just doesn't it has I think every major bargains hello whether single day event or dramatic turn over days weeks months years.
Is is is triggered by a bubble that burst or at least as part in the air starts coming out you could argue in some degree.
With with -- real estate obviously didn't and 87 you could argue -- adjusted didn't the mania Leveraged Buyouts and 89.
The meltdown real estate again some are saying it's a bond market and artificially low interest rates this go round as you were touching on.
Is that the modern day bubble.
Absolutely thanks I think it -- been in the banking business forty years I think every bubble we pay it was -- fundamentally created by the Federal Reserve.
I think if we had a stable monetary system by -- -- gold standard.
We would have a much less volatility because -- fear always over -- tax.
-- -- try to fix things and they make a -- so I don't think markets are anywhere near his volatile.
As that -- ideas that I think the -- it creates a lot of the small market volatility about misleading people trying to do economic calculus.
That's very interest in the says we're also in the markets' John always get some words of wisdom from me thank you my friend -- -- again.
Thank you have --
