BAM. Thanks, Alan! James Miller via Zero Hedge drops the hammer. Excerpts:
Unbelievable.
That is the only way to express this author’s utter bewilderment that former Federal Reserve chairman Alan Greenspan is still given an outlet to speak his mind. Actually, I am surprised Mr. Greenspan has the audacity to show his face, let alone speak, in public after the economic destruction he is responsible for.
It was because of Greenspan, of course, that the world economy is still muddling its way along with painfully high unemployment. His decision to prop up the stock market with money printing under any and every threat of a downtick in growth, also known as the Greenspan Put, created an environment of easy credit, reckless spending, and along with the federal government’s initiatives to encourage home ownership, the foundation from which a housing bubble could emerge.
It was moral hazard bolstering on a massive scale. Wall Street quickly learned (and the lesson sadly continues today) that the Federal Reserve stands ready to inflate should the Dow begin to plummet by any significant amount. Following his departure from the chairmanship and bursting of the housing bubble, Greenspan quickly took to the press and denied any responsibility for financial crisis which was a result in due part to the crash in home prices. In his infamous 2009 Wall Street Journal editorial, he had the nerve to blame availability of credit which financed the run-up in home prices to a “savings glut” in Asia. He writes.
Much of the aura of greatness attributed to Greenspan throughout his term as chairman was due in part to the purposefully overly-technical language he used when talking to reporters. Here he utilized the same technique, albeit in a simpler manner, to obscure the Fed’s role in the housing bubble. His explanation falls on its face though when looking at key historical data and by asking the right questions.
..
And as economist George Reisman brilliantly shows, the “savings glut” argument doesn’t stand when taking into account the following questions and observations:
That reverence seems to be fading quickly. By this fall, people should (finally!)have a very different opinion of Alan Greenspan, all the choices he's made, and where those choices have brought all of us. Right now, it's still the economists and information junkies and people his policies destroyed. More to arrive shortly, to be sure..
Unbelievable.
That is the only way to express this author’s utter bewilderment that former Federal Reserve chairman Alan Greenspan is still given an outlet to speak his mind. Actually, I am surprised Mr. Greenspan has the audacity to show his face, let alone speak, in public after the economic destruction he is responsible for.
It was because of Greenspan, of course, that the world economy is still muddling its way along with painfully high unemployment. His decision to prop up the stock market with money printing under any and every threat of a downtick in growth, also known as the Greenspan Put, created an environment of easy credit, reckless spending, and along with the federal government’s initiatives to encourage home ownership, the foundation from which a housing bubble could emerge.
It was moral hazard bolstering on a massive scale. Wall Street quickly learned (and the lesson sadly continues today) that the Federal Reserve stands ready to inflate should the Dow begin to plummet by any significant amount. Following his departure from the chairmanship and bursting of the housing bubble, Greenspan quickly took to the press and denied any responsibility for financial crisis which was a result in due part to the crash in home prices. In his infamous 2009 Wall Street Journal editorial, he had the nerve to blame availability of credit which financed the run-up in home prices to a “savings glut” in Asia. He writes.
[T]he presumptive cause of the world-wide decline in long-term rates was the tectonic shift in the early 1990s by much of the developing world from heavy emphasis on central planning to increasingly dynamic, export-led market competition. The result was a surge in growth in China and a large number of other emerging market economies that led to an excess of global intended savings relative to intended capital investment. That ex ante excess of savings propelled global long-term interest rates progressively lower between early 2000 and 2005.Sounds convincing right?
Much of the aura of greatness attributed to Greenspan throughout his term as chairman was due in part to the purposefully overly-technical language he used when talking to reporters. Here he utilized the same technique, albeit in a simpler manner, to obscure the Fed’s role in the housing bubble. His explanation falls on its face though when looking at key historical data and by asking the right questions.
..
And as economist George Reisman brilliantly shows, the “savings glut” argument doesn’t stand when taking into account the following questions and observations:
First, if saving had been responsible, rather than credit expansion and the increase in the quantity of money, there would have been a corresponding decline in consumer spending in the countries allegedly doing the saving. The fact is that there was no such decline.It should be perfectly clear at this point that Greenspan holds the majority of the blame for the housing bubble. And yet many financial media outlets still see the former central banker as a type of guru on global economic affairs.
Second, saving implies a growing supply of capital goods, more production, and lower prices, including lower prices of capital goods and even of land. These are results that are incompatible with the widespread increases in prices typically found in a bubble.
Third, if somehow saving had been responsible for the housing bubble, the spending it financed would not suddenly have stopped. Such stoppage is a consequence of the end of credit expansion and the revelation of a lack of capital.
Fourth, if large-scale saving rather than credit expansion had been present, banks and other firms would have possessed more capital, not less. They would not be in their present predicament of having inadequate capital to carry on their normal operations. This situation of insufficient capital is the result of malinvestment and over consumption, which are the consequences of credit expansion, not saving.
Fifth, in the absence of increases in the quantity of money and overall volume of spending in the economic system, saving also implies an immediate tendency toward a fall in the economy wide average rate of profit. This is another result that is incompatible with what is observed in a bubble or boom of any kind, which is surging profits so long as “the good times” last.
That reverence seems to be fading quickly. By this fall, people should (finally!)have a very different opinion of Alan Greenspan, all the choices he's made, and where those choices have brought all of us. Right now, it's still the economists and information junkies and people his policies destroyed. More to arrive shortly, to be sure..
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