Friedman v Rothbard

How can you tell if a person truly advocates a free market economy? Simple. He prefers Rothbard to Friedman.

Here are a few excerpts from a recent exchange sparked by this article. Missing Milton Friedman.

Tim Lee writes:

If only the free-market right still had such a powerfully persuasive "technician advising the state how to be more efficient", our economy might now be slightly less screwed. Maybe it would help were "advising the state to be more efficient" less widely considered "evil work".

Gary North responds:

We need less efficient government. Friedman never grasped this. Rothbard did. The few Establishment economists and columnists who have read Rothbard have never forgiven him for this...

Friedman was the main apologist for fiat money in the free market camp. He believed in free market liberty, but not where it is really important: education (vouchers based on state-confiscated money) and money itself (central banking based on a grant of state power: a monopoly). Murray Rothbard challenged both ideas. He therefore remains a pariah to the Establishment.

George Selgin and Donald Boudreaux have also weighed in. Robert Wenzel details most of the debate here.

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

Wall Street, Banks, and American Foreign Policy

A new introduction by Anthony Gregory.

Gregory writes:

The idea that corporate interests, banking elites, and politicians conspire to set US policy is at once obvious and beyond the pale. Everyone knows that the military-industrial complex is fat and corrupt, that presidents bestow money and privilege on their donors and favored businesses, that a revolving door connects Wall Street and the White House, and that economic motivations lurk behind America's wars. But to make too fine a point of this is typically dismissed as unserious conspiracy theorizing, unworthy of mainstream consideration.

We have seen this paradox at work in the aftermath of the 2008 financial collapse. The left-liberals blame Wall Street and Big Finance for betraying the masses out of predatory greed and for being rewarded for their irresponsibility by Washington's bailouts. At the same time, the Left appears reluctant to oppose these bailouts outright, seeing the spending as a necessary evil to return the global economy to stability, however inequitably. What's more, left-liberals fail to call out President Obama and Democratic leaders for their undeniable hand in all this. They blame Goldman Sachs but see their president, who got more campaign money from the firm than from almost any other source, as a helpless victim of circumstance, rather than an energetic conspirator in corporate malfeasance on top of being the enthusiastic heir and expansionist of George W. Bush's aggressive foreign policy.

The tea-party Right is also hesitant to examine the corporate state too closely. These conservatives detect an elitism in Obama's governance but are loath to earnestly challenge the economic status quo, for it would lead to uncomfortable questions about the warfare state, defense contractors, US wars, the whole history of the Republican Party, and all the typical right-wing assumptions about the inherent fairness of America's supposedly "free-enterprise" system. By refusing to admit that economic fundamentals were unsound through the entirety of the Bush years — by failing to acknowledge the imperial reality of US wars and their debilitating effect on the average household budget — the Right is forgoing its chance to delve beyond the surface in its criticism of Obama's reign.

read the entire essay

Rothbard on Depressions and their Cures

Thus, what the government should do, according to the Misesian analysis of the depression, is absolutely nothing. It should, from the point of view of economic health and ending the depression as quickly as possible, maintain a strict hands off, "laissez-faire" policy. Anything it does will delay and obstruct the adjustment process of the market; the less it does, the more rapidly will the market adjustment process do its work, and sound economic recovery ensue.

The Misesian prescription is thus the exact opposite of the Keynesian: It is for the government to keep absolute hands off the economy and to confine itself to stopping its own inflation and to cutting its own budget.

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Economic Depressions: Their Causes and Cure

Murray Rothbard writes:

What, then, are the causes of periodic depressions? Must we always remain agnostic about the causes of booms and busts? Is it really true that business cycles are rooted deep within the free-market economy, and that therefore some form of government planning is needed if we wish to keep the economy within some kind of stable bounds? Do booms and then busts just simply happen, or does one phase of the cycle flow logically from the other?

The currently fashionable attitude toward the business cycle stems, actually, from Karl Marx...
Marx concluded that business cycles were an inherent feature of the capitalist market economy. All the various current schools of economic thought, regardless of their other differences and the different causes that they attribute to the cycle, agree on this vital point: That these business cycles originate somewhere deep within the free-market economy. The market economy is to blame. Karl Marx believed that the periodic depressions would get worse and worse, until the masses would be moved to revolt and destroy the system, while the modern economists believe that the government can successfully stabilize depressions and the cycle. But all parties agree that the fault lies deep within the market economy and that if anything can save the day, it must be some form of massive government intervention.

There are, however, some critical problems in the assumption that the market economy is the culprit. For "general economic theory" teaches us that supply and demand always tend to be in equilibrium in the market and that therefore prices of products as well as of the factors that contribute to production are always tending toward some equilibrium point. Even though changes of data, which are always taking place, prevent equilibrium from ever being reached, there is nothing in the general theory of the market system that would account for regular and recurring boom-and-bust phases of the business cycle...

In the market economy, one of the most vital functions of the businessman is to be an "entrepreneur," a man who invests in productive methods, who buys equipment and hires labor to produce something which he is not sure will reap him any return...The market economy, then, is a profit-and-loss economy, in which the acumen and ability of business entrepreneurs is gauged by the profits and losses they reap. The market economy, moreover, contains a built-in mechanism, a kind of natural selection, that ensures the survival and the flourishing of the superior forecaster and the weeding-out of the inferior ones...How is it that, periodically, in times of the onset of recessions and especially in steep depressions, the business world suddenly experiences a massive cluster of severe losses?

An explanation such as "underconsumption" — a drop in total consumer spending — is not sufficient, for one thing, because what needs to be explained is why businessmen, able to forecast all manner of previous economic changes and developments, proved themselves totally and catastrophically unable to forecast this alleged drop in consumer demand. Why this sudden failure in forecasting ability?...

In particular, a theory of depression must account for the mammoth cluster of errors which appears swiftly and suddenly at a moment of economic crisis, and lingers through the depression period until recovery...Here is another fact of business cycle life that must be explained — and obviously can't be explained by such theories of depression as the popular underconsumption doctrine: That consumers aren't spending enough on consumer goods. For if insufficient spending is the culprit, then how is it that retail sales are the last and the least to fall in any depression, and that depression really hits such industries as machine tools, capital equipment, construction, and raw materials?...

Fortunately, a correct theory of depression and of the business cycle does exist, even though it is universally neglected in present-day economics...Essentially, these theorists saw that another crucial institution had developed in the mid-eighteenth century, alongside the industrial system. This was the institution of banking, with its capacity to expand credit and the money supply (first, in the form of paper money, or bank notes, and later in the form of demand deposits, or checking accounts, that are instantly redeemable in cash at the banks). It was the operations of these commercial banks which, these economists saw, held the key to the mysterious recurrent cycles of expansion and contraction, of boom and bust, that had puzzled observers since the mid-eighteenth century.

The banks, then, happily begin to expand credit, for the more they expand credit the greater will be their profits. This results in the expansion of the money supply within a country, say England. As the supply of paper and bank money in England increases, the money incomes and expenditures of Englishmen rise, and the increased money bids up prices of English goods. The result is inflation and a boom within the country. But this inflationary boom, while it proceeds on its merry way, sows the seeds of its own demise...

As this process intensifies, the banks will eventually become frightened. For the banks, after all, are obligated to redeem their liabilities in cash, and their cash is flowing out rapidly as their liabilities pile up. Hence, the banks will eventually lose their nerve, stop their credit expansion, and in order to save themselves, contract their bank loans outstanding...The bank contraction reverses the economic picture; contraction and bust follow boom...

This, then, is the meaning of the depression phase of the business cycle. Note that it is a phase that comes out of, and inevitably comes out of, the preceding expansionary boom. It is the preceding inflation that makes the depression phase necessary. We can see, for example, that the depression is the process by which the market economy adjusts, throws off the excesses and distortions of the previous inflationary boom, and reestablishes a sound economic condition. The depression is the unpleasant but necessary reaction to the distortions and excesses of the previous boom.

Why, then, does the next cycle begin? Why do business cycles tend to be recurrent and continuous? Because when the banks have pretty well recovered, and are in a sounder condition, they are then in a confident position to proceed to their natural path of bank credit expansion, and the next boom proceeds on its way, sowing the seeds for the next inevitable bust...

Banks can only expand comfortably in unison when a Central Bank exists, essentially a governmental bank, enjoying a monopoly of government business, and a privileged position imposed by government over the entire banking system. It is only when central banking got established that the banks were able to expand for any length of time and the familiar business cycle got underway in the modern world...

So now we see, at last, that the business cycle is brought about, not by any mysterious failings of the free market economy, but quite the opposite: By systematic intervention by government in the market process. Government intervention brings about bank expansion and inflation, and, when the inflation comes to an end, the subsequent depression-adjustment comes into play...

The correct and fully developed theory of the business cycle was finally discovered and set forth by the Austrian economist Ludwig von Mises, when he was a professor at the University of Vienna...

Without bank credit expansion, supply and demand tend to be equilibrated through the free price system, and no cumulative booms or busts can then develop. But then government through its central bank stimulates bank credit expansion by expanding central bank liabilities and therefore the cash reserves of all the nation's commercial banks. The banks then proceed to expand credit and hence the nation's money supply in the form of check deposits. As the Ricardians saw, this expansion of bank money drives up the prices of goods and hence causes inflation. But, Mises showed, it does something else, and something even more sinister. Bank credit expansion, by pouring new loan funds into the business world, artificially lowers the rate of interest in the economy below its free market level.

On the free and unhampered market, the interest rate is determined purely by the "time-preferences" of all the individuals that make up the market economy...

The inflationary boom thus leads to distortions of the pricing and production system. Prices of labor and raw materials in the capital goods industries had been bid up during the boom too high to be profitable once the consumers reassert their old consumption/investment preferences. The "depression" is then seen as the necessary and healthy phase by which the market economy sloughs off and liquidates the unsound, uneconomic investments of the boom, and reestablishes those proportions between consumption and investment that are truly desired by the consumers...

What does Mises say should be done, say by government, once the depression arrives? What is the governmental role in the cure of depression? In the first place, government must cease inflating as soon as possible. It is true that this will, inevitably, bring the inflationary boom abruptly to an end, and commence the inevitable recession or depression. But the longer the government waits for this, the worse the necessary readjustments will have to be. The sooner the depression-readjustment is gotten over with, the better. This means, also, that the government must never try to prop up unsound business situations; it must never bail out or lend money to business firms in trouble. Doing this will simply prolong the agony and convert a sharp and quick depression phase into a lingering and chronic disease. The government must never try to prop up wage rates or prices of producers' goods; doing so will prolong and delay indefinitely the completion of the depression-adjustment process; it will cause indefinite and prolonged depression and mass unemployment in the vital capital goods industries. The government must not try to inflate again, in order to get out of the depression. For even if this reinflation succeeds, it will only sow greater trouble later on. The government must do nothing to encourage consumption, and it must not increase its own expenditures, for this will further increase the social consumption/investment ratio. In fact, cutting the government budget will improve the ratio. What the economy needs is not more consumption spending but more saving, in order to validate some of the excessive investments of the boom. Thus, what the government should do, according to the Misesian analysis of the depression, is absolutely nothing. It should, from the point of view of economic health and ending the depression as quickly as possible, maintain a strict hands off, "laissez-faire" policy. Anything it does will delay and obstruct the adjustment process of the market; the less it does, the more rapidly will the market adjustment process do its work, and sound economic recovery ensue.

The Misesian prescription is thus the exact opposite of the Keynesian: It is for the government to keep absolute hands off the economy and to confine itself to stopping its own inflation and to cutting its own budget.

read the entire essay

Happy Birthday, Murray

Today — March 2nd — is Murray Rothbard’s birthday. Had he lived, he’d be 84 years old today. And there’s sadness in that, because 84 in the world of today, though still a “ripe old age,” is not really all that old. Lots of people live to be 84. Even libertarians do it. Both Ludwig von Mises and Friedrich Hayek lived to be 92. Milton Friedman lived to be 94. Henry Hazlitt lived to be 98. In Radicals for Capitalism, his important 2007 book about the history of the modern American libertarian movement, Brian Doherty centers his story around what he describes as “[f]ive thinkers … without whom there would have been no uniquely libertarian ideas or libertarian institutions of any popularity or impact in America in the second half of the twentieth century … Ludwig von Mises, Friedrich A. Hayek, Ayn Rand, Murray Rothbard, and Milton Friedman.”

“Four men and one woman,” Doherty writes, “four Jews and one Catholic; four economists and one novelist; four minarchists … and one anarchist … two native-born Americans and three immigrants; two Nobel Prize winners and three who remained not only aloof from most professional and intellectual accolades but generated a heated hostility from cultural gatekeepers.” Doherty makes no mention of it, but there’s yet another facile point of comparison he might have used in discussing his five major figures — their longevity. For of his five major figures, three (Mises, Hayek, and Friedman) lived into their 90s. The other two — Rand and Rothbard — never made it to 80. Rothbard never made it to 70. It’s almost as though radicalism makes you die young. Mises, Hayek, and Friedman were minarchists — classical liberals, to be more precise.

Rand was a minarchist, too, but of a more radical stripe. She required that her limited, night-watchman State get along without any power of taxation, which she rightly regarded as theft. And Rothbard, who lived the shortest life of them all, was, of course, an anarchist, the only writer among them with the courage to assert boldly that the State didn’t need limiting, it needed abolishing.

Another way of putting this would be to say that Rothbard was the only pure libertarian among Doherty’s Big Five — not a classical liberal or even a more radical minarchist like Ayn Rand, but a thinker who saw the implications of the libertarian axiom, the nonaggression axiom, and unflinchingly accepted those implications, the only one among Doherty’s Big Five who was unafraid to follow his thinking where it must inevitably lead him. Brian Doherty calls Rothbard “the most uniquely and characteristically libertarian of libertarians; the one whose influence explains most about what makes the ideas, behavior, and general flavor of American libertarianism unique; the most illustrative and paradigmatic of the foundational figures of modern libertarianism.” It’s not for nothing that during the 1970s Rothbard came to be widely known as “Mr. Libertarian.”

listen (23:26)

source

If Murray Rothbard—free-market economist, anarchist philosopher, American historian, and inveterate activist—had never lived, the modern libertarian movement would have nowhere near its current size and influence. He inspired and educated generations of influential intellectuals and activists, from Leonard Liggio to Roy Childs to Randy Barnett. He helped form and/or shape the mission of such institutions as the Institute for Humane Studies, the Cato Institute, the Libertarian Party, and the Ludwig von Mises Institute (and wrote a regular column for Reason for more than a decade). His initially unique combination of a Randian/Aristotelian natural rights ethic, Austrian economics, anarcho-capitalism, fervent opposition to war, and a populist distrust of “power elites” both public and private have injected modern libertarianism with a distinct flavor distinguishing it from other brands of pro-market thought. It was a differentiation intensified by Rothbard’s bombthrowing polemical style.

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How to Avoid Great Depression II

If government wishes to alleviate, rather than aggravate, a depression, its only valid course is laissez-faire – to leave the economy alone. Only if there is no interference, direct or threatened, with prices, wage rates, and business liquidation will the necessary adjustment proceed with smooth dispatch... The proper injunction to government in a depression is cut the budget and leave the economy strictly alone.
Murray Rothbard

A Program of True Economic Reform

1) End the Fed.

2) Restore sound money to the economy.

3) Lower taxes and cut government spending.

4) No bailouts.

5) Allow prices and wages to fall to levels set by the market.

6) Regulate the government, not private property and markets.

read the entire essay

My thoughts: This is an outstanding essay that provides many fact and figures debunking the idea that massive government intervention can solve economic problems.

Caplan Book Club: For a New Liberty

Bryan Calpan is starting a book club.

Is there any interest in having an EconLog Book Club on Murray Rothbard's For a New Liberty? I've got a lot of history with this book, which is now available online. I read it about ten times between the years of 1989 and 1994, and it had a tremendous influence on my thinking. But I haven't read it for fifteen years. Now I'm curious to revisit it and see how well it holds up.

Even if you find the anarcho-capitalist substance of the book noxious, it's hard not to admire the style. For a New Liberty is ridiculously well-written, so whatever you conclude, you'll enjoy the book club experience.

Who's in?P.S. Glad to see there's so much interest. I suggest we start discussing Chapter 1, "The Libertarian Heritage: The American Revolution and Classical Liberalism" on January 20.

My thoughts: This could be interesting for those interesting in learning more about liberty and individual freedom.

More info here.

A Solution to the Crisis: Government or Markets?

Government

"We can solve this crisis - and we will," said Bush, in a speech at the White House...

"Here's what the American people need to know: The U.S. government is acting, and we will continue to act, to resolve this crisis and return stability to our markets," he said.

Bush said that the government's "wide range of tools" included the $700 billion bailout of the financial industry, which he said is "big enough to work." This plan will authorize the Treasury to buy bad mortgage-related investments from finance companies, unfreezing the credit markets by freeing up banks and finance firms to lend once again.

Bush also said the government has started to take steps to help homeowners to refinance into more affordable mortgages; cut the target for the federal funds rate; unveiled a plan to support the market for commercial paper; and has offered government insurance for money market mutual funds.

In addition, he said the U.S. government is coordinating its efforts with other counties.

source

Markets

If government wishes to alleviate, rather than aggravate, a depression, its only valid course is laissez-faire – to leave the economy alone. Only if there is no interference, direct or threatened, with prices, wage rates, and business liquidation will the necessary adjustment proceed with smooth dispatch.

Any propping up of shaky positions postpones liquidation and aggravates unsound conditions. Propping up wage rates creates mass unemployment, and bolstering prices perpetuates and creates unsold surpluses.

Moreover, a drastic cut in the government budget – both in taxes and expenditures – will of itself speed adjustment by changing social choice toward more saving and investment relative to consumption. For government spending, whatever the label attached to it, is solely consumption; any cut in the budget therefore raises the investment-consumption ratio in the economy and allows more rapid validation of originally wasteful and loss-yielding projects.

Hence, the proper injunction to government in a depression is cut the budget and leave the economy strictly alone. Currently fashionable economic thought considers such a dictum hopelessly outdated; instead, it has more substantial backing now in economic law than it did during the 19th century.

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Economic Depressions: Their Cause and Cure

It is the preceding inflation that makes the depression phase necessary. The depression is the process by which the market economy adjusts, throws off the excesses and distortions of the previous inflationary boom, and reestablishes a sound economic condition.

The depression is the unpleasant but necessary reaction to the distortions and excesses of the previous boom. the business cycle is brought about, not by any mysterious failings of the free market economy, but quite the opposite: By systematic intervention by government in the market process. Government intervention brings about bank expansion and inflation, and, when the inflation comes to an end, the subsequent depression-adjustment comes into play.

What the government should do, according to the Misesian analysis of the depression, is absolutely nothing. It should, from the point of view of economic health and ending the depression as quickly as possible, maintain a strict hands off, "laissez-faire" policy. Anything it does will delay and obstruct the adjustment process of the market; the less it does, the more rapidly will the market adjustment process do its work, and sound economic recovery ensue.

read the full article

The Case Against the Fed

After 80-plus years of inflation and devastating booms and busts, how do we get rid of the cause of these economic cancers? “The only way to do that is to abolish legalized counterfeiting: that is, to abolish the Federal Reserve System, and return to the gold standard,” answers Murray Rothbard in his book The Case Against the Fed...

Rothbard lays to rest the myth that the Panic of 1907 led to the creation of the Fed. Bankers began scheming for a central bank after William McKinley defeated William Jennings Bryan in the 1896 presidential election. Long gone were the days of the hard-money Jacksonian Democratic party, and the populist Democrat Bryan pushed for monetizing silver to increase the supply of money. Wall Street's bankers supported McKinley, not wanting inflation that they couldn't control...

With the Fed abolished, banks would be on their own; no more lender of last resort, or taxpayer bailouts. The inflation dragon would be slain. The boom-and-bust roller coaster ride leveled.

read the book review

Recommended Reading: Hoover's Attack on Laissez Faire

Hoover's Attack on Laissez-Faire
Murray Rothbard (from Chapter 7 of America's Great Depression)

If government wishes to alleviate, rather than aggravate, a depression, its only valid course is laissez-faire — to leave the economy alone. Only if there is no interference, direct or threatened, with prices, wage rates, and business liquidation will the necessary adjustment proceed with smooth dispatch.

Any propping up of shaky positions postpones liquidation and aggravates unsound conditions. Propping up wage rates creates mass unemployment, and bolstering prices perpetuates and creates unsold surpluses...

Hence, the proper injunction to government in a depression is cut the budget and leave the economy strictly alone. Currently fashionable economic thought considers such a dictum hopelessly outdated; instead, it has more substantial backing now in economic law than it did during the 19th century...

Laissez-faire, then, was the policy dictated both by sound theory and by historical precedent. But in 1929, the sound course was rudely brushed aside. Led by President Hoover, the government embarked on what Anderson has accurately called the "Hoover New Deal." For if we define "New Deal" as an antidepression program marked by extensive governmental economic planning and intervention — including bolstering of wage rates and prices, expansion of credit, propping up of weak firms, and increased government spending (e.g., subsidies to unemployment and public works) — Herbert Clark Hoover must be considered the founder of the New Deal in America. Hoover, from the very start of the depression, set his course unerringly toward the violation of all the laissez-faire canons. As a consequence, he left office with the economy at the depths of an unprecedented depression, with no recovery in sight after three and a half years, and with unemployment at the terrible and unprecedented rate of 25 percent of the labor force...

read the entire essay

My Comments: Economic freedom and laissez-faire are vastly superior to central planning, government intervention, and various middle-of-the-road policies that carry us further down the road to serfdom.

New Book: Greenspan's Bubbles: The Age of Ignorance at the Federal Reserve

No matter who you are-investor, trader, homeowner, 401(k) holder, or CEO-you are bound to feel the impact of Alan Greenspan's “Age of Ignorance” for years to come.

According to MSN Money columnist William A. Fleckenstein, Greenspan's nearly 19-year career as Federal Reserve Chairman is even worse than anyone imagined. Labeled “Mr. Bubble” by the New York Times, Greenspan was nothing less than a serial bubble blower with a long history of bad decision-making. His famous “Greenspan Put” fueled the perception of a Goldilocks economy-but, as this explosive exposé reveals, the bear has finally caught up with Goldilocks.

Using transcripts of Greenspan's FOMC meetings as well as testimony before Congress, this eye-opening book delivers a timeline of his most devastating mistakes and weaves together the connection between every economic calamity of the past 19 years:

• The stock market crash of 1987
• The Savings & Loan crisis
• The collapse of Long Term Capital Management
• The tech bubble of 2000
• The feared Y2K disaster
• The credit bubble and real estate crisis of 2007

Fleckenstein explains just how far-reaching Greenspan's mess has been flung, and presents damning evidence that contradicts the former Fed chief's public naiveté concerning shifts in the market and economy. He also points to a disturbing fact, that throughout his career, Greenspan not only made costly mistakes, but made the same ones-over and over again. And not only was he never able to recognize or admit to those mistakes, he constantly rewrote his own history to justify them.

Greenspan's Bubbles offers a lock-stock-and-barrel portrait of a flawed but fascinating man whose words and actions have led a whole generation astray, and whose legacy will continue to challenge us in the years ahead.

from the review at Amazon

Of course those who are familiar with actual free market economics would know that Murray Rothbard had exposed Greenspan two decades ago.

A Minority Report: Alan Greenspan
by Murray Rothbard (8/87)

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...

Over the years, Greenspan has, for example, supported President Ford's imbecilic Whip Inflation Now buttons when he was Chairman of the Council of Economic Advisers. Much worse is the fact that this "high philosophic" adherent of laissez-faire saved the racketeering Social Security program in 1982, just when the general public began to realize that the program was bankrupt and there was a good chance of finally slaughtering this great sacred cow of American politics. Greenspan stepped in as head of a "bipartisan" (i.e. conservative and liberal centrists) Social Security Commission, and "saved" the system from bankruptcy by slapping on higher Social Security taxes...

...And as icing on the cake, they know that Greenspan's "philosophical" Randianism will undoubtedly fool many free market advocates into thinking that a champion of their cause now perches high in the seats of power.

read the entire essay

Another take on Greenspan

The result of this has been to increase the willingness of investors to participate in speculative bubbles because they know that if things go wrong and they are unable to get out before the bubble burst, their good friend Alan Greenspan will bail them out and limit their losses. Greenspan has thus been responsible for bubbles like the tech stock bubble and the housing bubble both by suppressing interest rates and providing the "liquidity" needed to create the bubbles, and also by reducing investors fear of losses after the bubble bursts by creating the expectations that the Fed will bail them out.

The consequences of this have been great. Instead of falling as a result of increased production, the consumer price index rose nearly 74% between August 1987 and November 2005, an average annual increase of 3.1%...

Greenspan's policy of inflating bubbles to counter the negative effects of the bursting of previous ones is like someone who remains on a sinking ship because he doesn't like to swim.

read the entire essay

Greesnpans' reputation has taken a well deserved beating since his days (late 2000) when nearly everyone thought he was "the maestro of the rock-solid prospering American economy."