[squiffy]

First, Greenspan's public remarks are very different from his private thoughts. He must generally put a good face on things and not try to rile the markets, let alone influence elections.

Privately, he is quite upset about the budget deficits that Bush is running and I believe mentioned the budget deficit in his statements to Congress.

Secondly, Greenspan's comments are more a statement about what inflation has been and what inflation is. Not a definitive prediction about what inflation will be in the future.

Note the fed changed its language about holding short-term rates constant indefinitely to we can afford to be patient.

But rates will most certainly rise if the expansion continues.

He is, as always, basically non-committal. He will raise rates as necessary to combat inflation. No one is arguing with the truism that rates have been low and that at present they remain low, and that at present inflation is not a threat.

But once the expansion takes place, if it continues at its current rate, (particularly if it is accompanied by a worldwide economic expansion) rates will go up.

And even if the fed does not raise short-term rates, long term rates will rise. The fed does not control long-term rates. The market does.

Note that Greenspan does not say he won't raise rates until the year 2008. He makes no definitive prediction as to how long he will remain patient. Patient could mean one month, one year, or ten years.

Greenspan's statements are not necessarily an alternative viewpoint to Gross. Greenspan tries to stay factual and non-committal. He does not predict that rates will not rise. He provides no specific timeframe or clear prediction.

If you ask both Greenspan and Gross privately whether they think rates (short term and long term) will be higher in 2005 or 2006 than in 2003, they may both tell you, yes, it is more likely than not that rates will be higher in the future, assuming U.S. economic growth continues at its current pace.

Think about how subtle, tactful, and courtier-like Greenspan is. He is always indirect and understated. Remember Greenspan's comments about irrational exuberance on the stock market way back in Dec. 1996.

Even a tiny statement about the budget deficit shows the extent of his concern about its future effects on inflation. But he cannot come out publicly and say this too strongly, because he would be getting involved in a political decision which really is not his province, though the budget deficit certainly threatens to make his job of inflation fighting much more difficult in the future.