Greenspan is Pro-Printing Press

Former Federal Reserve Chairman, Alan Greenspan, appeared on MSNBC's meet the Press where he made a shockingly blatant statement that is sure to make its way around the 'Net at lightning speed.

What makes this ironic, is that many free-market and Austrian economists believe Greenspan's policy of taking interest rates to historic lows at the Fed were responsible for the subprime mortgage and credit crises and the bubble in the real estate and stock markets which culminated in the 2008 market meltdown and real estate crash. In fact, Time Magazine placed him 3rd on a list of 25 people to blame for the financial crisis, and this is probably so.

While Greenspan has spent much of his time since the crisis attempting to rewrite history and his participation in the worst economic downturn since the Great Depression, mainstream media appearances such as this one will not liekly do much to help his efforts.

In this MSNBC interview, Greenspan was asked, "Are US Treasury bonds still safe to invest in?" You have to listen to his answer to believe it. Greenspan sits there and utters a single sentence that basically says what no dollar-debt holder wants to hear: We will devalue your debt into the ground by cranking up the printing presses.

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Alan Greenspan, "The Flaw", Laissez-faire, and Moral Hazard

Newsweek reports:

In the fall of 2008, with the global economy in shambles and panic spreading throughout the financial system, a seemingly humbled Alan Greenspan—the former chairman of the U.S. Federal Reserve—appeared before Congress and admitted the unimaginable: there was a “flaw” in his world view that had prevented him from foreseeing the worst credit crisis in American history.

And so begins The Flaw, David Sington’s new documentary about the origins of the financial crisis. The movie, which opened in London last week, makes a compelling argument that the nature of American capitalism has changed in recent decades, giving rise to unstable levels of inequality and a mistaken belief in the self-correcting power of free markets. The Flaw focuses largely on the housing market and offers a far less blistering critique of Wall Street than Inside Job¸ Charles Ferguson’s 2010 Oscar-winning documentary. Yet in both films, Greenspan, who spoke with NEWSWEEK at his office in Washington, D.C., is cast in a similar role—as someone who personifies much of what went wrong with the economy...

Despite his 2008 mea culpa, Greenspan has largely remained steadfast in his faith in laissez faire, arguing against the government’s stimulus package and recent financial regulation. As Congress continues to fight over long-term spending and the future of entitlements, it is precisely this sort of stubborn libertarianism that has enraged Greenspan’s critics and once again cast a spotlight on his legacy.

read the article

Anthony Gregory on the meddling Fed: When All You Have is a Hammer

Murray Rothbard on Greenspan (writing in 1987)

Greenspan's real qualification is that he can be trusted never to rock the establishment's boat. He has long positioned himself in the very middle of the economic spectrum. He is, like most other long-time Republican economists, a conservative Keynesian, which in these days is almost indistinguishable from the liberal Keynesians in the Democratic camp. In fact, his views are virtually the same as Paul Volcker, also a conservative Keynesian. Which means that he wants moderate deficits and tax increases, and will loudly worry about inflation as he pours on increases in the money supply.

There is one thing, however, that makes Greenspan unique, and that sets him off from his Establishment buddies. And that is that he is a follower of Ayn Rand, and therefore "philosophically" believes in laissez-faire and even the gold standard. But as the New York Times and other important media hastened to assure us, Alan only believes in laissez-faire "on the high philosophical level." In practice, in the policies he advocates, he is a centrist like everyone else because he is a "pragmatist."

As an alleged "laissez-faire pragmatist," at no time in his prominent twenty-year career in politics has he ever advocated anything that even remotely smacks of laissez-faire, or even any approach toward it. For Greenspan, laissez-faire is not a lodestar, a standard, and a guide by which to set one's course; instead, it is simply a curiosity kept in the closet, totally divorced from his concrete policy conclusions.

read the essay

Ron Paul v. The Fed

Cartoon: Irrational Exuberance

Greenspan v Bernanke

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Greenspan: March 2001

Both the Bush Administration and the Congressional Budget Office project growing on-budget surpluses under current policy over the next decade. ...

The most recent projections from OMB and CBO indicate that, if current policies remain in place, the total unified surplus will reach about $800 billion in fiscal year 2010, including an on-budget surplus of almost $500 billion.

Moreover, the admittedly quite uncertain long-term budget exercises released by the CBO last October maintain an implicit on-budget surplus under baseline assumptions well past 2030 despite the budgetary pressures from the aging of the baby-boom generation, especially on the major health programs.

These most recent projections, granted their tentativeness, nonetheless make clear that the highly desirable goal of paying off the federal debt is in reach and, indeed, would occur well before the end of the decade under baseline assumptions.

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Economic Collapse?

The world seems on course for another crisis in 2012. The same people who caused the last crisis are still in charge. They'll get us into another.

Andy Xie

Federal Reserve Chairman Ben Bernanke with ex-chair Alan Greenspan. Greenspan presided over one of the largest periods of growth in US history. But it proved unsustainable. Now, he is warning that America must pay down its substantial debt. On average, the US national debt has been growing by $3.2 billion per day since 2006.

What is now even more disturbing about our future is that it is quickly becoming conventional wisdom that, not only do we need another inflated asset class to generate American-style prosperity, but that it’s the central bank’s job to make that happen.

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Sparks Meets with Greenspan and Bernanke

Mogambo Guru on Alan Greenspan

The guy responsible for all of this suffering and misery is, of course, Alan Greenspan, the lunatic former chairman of the Federal Reserve who personally created all the excess money for all the years that produced the bubbles in stocks, in bonds, in houses, in derivatives and in the cancerous size of a gargantuan deficit-spending government.

And since Greenspan is an old man now, if we are going to wreak vengeance upon him for the inflationary bust that is unfolding all around us, so that all future chairmen of the Federal Reserve will remember with a shudder the fate of those who foster crazy monetary booms and allow the money supply to rise to produce inflation in prices, we had better do it soon.

If not, we will be whacking on a dead guy which loses something in the “lesson” department when video footage could show Greenspan begging for his life and saying how he is sorry for having created so much money, that created so much consumption, that created so much new debt, that created so much new deficit-spending government, which produced so much more government, which created so many new people now dependent upon government, which created the “need” for more taxes and more deficit-spending, which was accommodated by the creation of more money by the Federal Reserve and the demonic Alan Greenspan, turning government deficit-spending and Federal Reserve over-creation of money into a hellish, poisonous brew that will combine, like a tornado inside a hurricane inside a tsunami during an earthquake caused by getting smashed with a huge killer-asteroid, to produce horrific inflation in prices.

read the entire essay

Nobel Prize in Economics

The Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel 2010 was awarded jointly to Peter A. Diamond, Dale T. Mortensen and Christopher A. Pissarides.

Diamond, 70, is an economist at the Massachusetts Institute of Technology, and a specialist in Social Security. Bernie Madoff would have loved to have Diamond on his team, since Diamond completely ignores the Ponzi like aspects of Social Security and tinkers with "fixing" the scam. Going beyond Madoff, Diamond then ignores the coercion involved in SS. He focuses with tunnel-like narrow vision beyond the coercive aspects, and Ponzi like aspects, to pontificate in numerous journal articles and books about how to "save" SS, including recommendations to cut "benefits" and aggressively increase SS taxes...

Mortensen, 71, is an economics professor at Northwestern University in Evanston, Illinois. He studies frictional unemployment. This is like studying half time in a basketball game. Yeah, it exists, but it is a pretty simple concept that doesn't tell you much about the game. Frictional unemployment simply means that if someone loses a job, it takes them time to find another job...

Outside of this obvious point, these guys have no real insights that can help anyone understand the economy and one of them. Diamond, is near the controls of the greatest Ponzi scheme the earth has ever experienced. I would be objecting less if the award was given directly to Madoff.

In summary, the Nobel Committee could have only done a worse job by giving the award jointly to Alan Greenspan and Ben Bernanke.

read the entire article

Greenspan and the Economic Crisis

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Richard Daughty on Alan Greenspan

Daughty writes:

Instantly, at the mention of the name of the loathsome Alan Greenspan, chairman of the Federal Reserve from 1987 to 2006, people reflexively grow alarmed that I am going to Go Freaking Berserk (GFB) about how much I despise that little piece of lowlife intellectual poseur crap who single-handedly created so much money, committed so much intellectual fraud, like creating the infamous Hedonic Adjustment of inflation statistics, and who has caused all the economic problems of crushing debt that bedevil us, that he belongs in a filthy, rat-infested prison where he never sees the sun as a “best case” scenario for him, the little bastard.

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Greenspan, Bernanke, and Central Bank Stupidity

The Mogambo Guru writes:

Well, I am sure you can understand how I could easily make the mistake, and now we are screwed because Alan Greenspan was a lying, slimy little treacherous weasel who could not “afford to be blunt,” but who could afford to keep creating more and more money, gradually destroying the US dollar’s buying power with constant, simmering inflation in prices, so that even the lying US government is forced to admit that $1 in 1987, when Greenspan took over the Fed, had the buying power of $1.77 in 2006 when he retired, which is a compounding inflation rate of 3%! Yikes!

Long-term 3% inflation is, as you can probably tell by the expression on my face, outrageous! And it is especially outrageous because the Federal Reserve was created to prevent inflation! Their mission was to preserve the value of the dollar, and Alan Greenspan gave us a cumulative 77% inflation in the 19 years he was in office! Gaaahhh!...

The reason that I snarl in contempt is that this current recession is actually nothing –nothing! – compared to the many, many other financial crises throughout history, all of them caused when stupid bankers like him, or governments themselves, were allowed to create too much money, which distorts the whole economy and causes inflation in the cost of consumer goods, like food and energy, and nowadays those yummy little chocolate-covered donuts that we all love so much, but which cost almost 50 cents apiece now...

What Bernanke said was, “Financial crises will continue to occur, as they have around the world for literally hundreds of years,” although he should have added “that will result from the repeated stupidity of banks and countries continually increasing the money supply, which distorts the economy in weird, unpredictable booms and makes consumer prices go up, which is the Exact Wrong Thing (EWT) to do, which is a point that you would think would be crystal-clear even to a neo-Keynesian econometric halfwit like me, seeing that mere literacy is required to read the actual, written mission of the Federal Reserve, which is to maintain stable prices.

“But thanks to the incompetence of the Federal Reserve, the dollar has tragically lost almost 97% of its purchasing power since the inception of the Federal Reserve in 1913, making a complete mockery of me and the Federal Reserve, proving that I obviously have no idea what in the hell I am doing, except that I know it is wrong, but I keep doing it.”

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Greenspan and "The Crisis"

In a detailed review of the causes of the financial crisis, former Federal Reserve Chairman Alan Greenspan acknowledged a range of regulatory failures but strongly disputed the widely held view that the Fed left interest rates too low for too long...

Mr. Greenspan's reputation has been tarnished by the crisis. Widely hailed when he left office in January 2006 as one of the greatest central bankers ever, he is now blamed by many for advocating deregulation and low interest rates during the 1990s and 2000s.

WSJ article

Barry Ritholtz responds:
his incompetence as a regulator made his incompetence as a central banker even worse.

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here is the Greenspan paper: The Crisis

Bubbles Greenspan and the Significance of Dow 10,000

When the Dow scaled 10,000 in March of 1999, the stock market had been rallying for several years already. Just five years earlier, the Dow had breezed through the 5,000-level. Therefore, almost no one doubted that 10,000 would be a mere stepping stone to 15,000…or 20,000…or yes, even 36,000, as James Glassman and Kevin Hassett infamously predicted in their 1999 classic: Dow 36,000: The New Strategy for Profiting From the Coming Rise in the Stock Market...

What went wrong?

The short answer is: Alan Greenspan. (The long answer is also Alan Greenspan). The former Chairman of the Federal Reserve nurtured an epic financial bubble during most of his 19-year reign...

What does this condensed and biased portrayal of history have to do with Dow 10,000? Just this: without easy credit, and the mania it spawned, Dow 10,000 would not have been possible. When the Dow first reached that magical level in 1999, the blue chip index was trading hands for about 28 times earnings – its highest valuation in 70 years.

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Mogambo Guru on the Fed

“Do you think that the economy of the USA is getting better, staying the same, or getting worse? And if you think that it is getting better, then explain how in the hell that is even possible, ya moron, when the Federal Reserve, that loathsome piece of treacherous crap which caused all the housing problems by creating too much money and credit, and which caused the derivatives problem by creating too much money and credit, and which caused the cancerous growth of a stifling, suffocatingly expensive government by creating too much money and credit, and which caused interest rates to drop so impossibly low by creating too much money and credit, is still on the job! Still On The Freaking Job (OTFJ), creating too much money and credit, but in amounts that dwarf any of the previously insane increases in the money supply by the loathsome Alan Greenspan, chairman of the Federal Reserve 1987-2006, even though those relatively small, $10 billion per month increases in Fed Credit were responsible for all the umpteen trillions of dollars in phantom gains, all of which are the result of year after year of sizzling inflations in stocks, bonds, houses, derivatives and the size of government that all that the extra money bought and paid for!”

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Cartoon: Fed "Leadership"

Greenspan on the Economy

Greenspan told the ABC program "This Week" that he expected 3 percent growth in the third quarter, up from the 2.5 percent he previously predicted. However, he said a "pretty awful" September employment report released Friday showed the jobless rate continued to climb.

A slowing or halt in job losses is different from reversing the rise in unemployment, Greenspan noted, adding that the nation's unemployment rate -- currently 9.8 percent -- is "going to penetrate the 10 percent barrier before heading down."...

Obama said Saturday his administration would focus on job creation, and Greenspan said he supported that approach. However, Greenspan said it was too soon to consider another economic stimulus package or other major spending plan.

"We are in a recovery, and I think it would be a mistake to say the September numbers alter that significantly," Greenspan said, adding: "This is what a recovery looks like. ... It's premature to act on this type of information."

read the CNN article

Greenspan's Bubble

Greenspan, the Fed, and the Housing Bubble

In a recent WSJ essay, Greespan denied responsibility for the housing bubble.

Fed Governor Donald Kohn viewed things a little differently.

"Long-term interest rates--the ones most relevant to the borrowing and spending decisions of households and firms--have been held down by easy monetary policy and the expectation that short-term rates will remain low for some time. And these low rates in turn have boosted the prices of houses and the value of corporate equity."

read the full paper