Greenspan has more in common with Madoff than most would realize at first blush. Both ran multi-year, massive ponzi schemes. Greenspan's was far more damaging by a margin of 10,000%.
"a monetary policy that is successful in inducing stability may inadvertently be sowing the seeds of instability associated with asset bubbles." - Alan Greenspan, December 2002 "It seems improbable that a surge in innovation in the near future would generate a new bubble of substantial proportions." - Alan Greenspan, December 2002 That's right folks - Greenspan at the end of 2002 said that it was improbable there would be a substantial new bubble in the near future. The next 3-4 years saw the spectacular blowoff of the biggest housing and credit bubble in western economic history. And Greenspan himself said that a dovish rate policy to try to smooth the cycle could sow the seeds for future bubbles & instability - so the former Fed chairman actually *agrees* that being too easy with monetary policy can contribute to bubbles. Yet according to Daal, if you point out any of this or criticise the Fed for that, you're a religious fundamentalist. Excuse me while I go say my kumbayas.
Ok so all the sudden government intervention can work? I'm addressing free market fundamentalists here, they clain it was fed funds who created a bubble. Greenspan presents evidence that is isnt. But with regards to regulation to prevent bubbles, the greenspan argument is 'I dont know of a single case in history where regulation has defused a bubble, if there was a simple way to do it I would be all for it', he might very well be right since government employees are just as vulnerable to believe a bubble will go on as a private sector participant Even Warren buffett though housing was sustainable. And market forces are too huge to expect laws to change it(furthermore fraud is very much present in bubbles so the law doesnt matter) And with regards to bias and political attacks, you couldn't be more wrong. I could careless if the republicans or democrats are right, if the keneysians or monetarists or austrians are right. I attack them when they are wrong, that is all The only that I care is that *I'm right*, that is my religion and my PL is my god. I will get plenty of things wrong but it will only be after looking at the evidence in the most fair way possible because biases dont pay bills
he said: fed controls fed rate =>overnight rates and long term rate in 2002-2005 were uncorrelated to short term rates so fed policy not => house bubble i say: keep high fed fund => high long term rates, even uncorrelated but high...
Read his book. He raised rates in particular to slowdown housing yet due global forces that was not possible. You want to blame a policeman without a gun for not stopping a bank robbery
Great take down. Greenspan is desperately trying to salvage his legacy, but it's too late. He kept interest rates far too low for far too long, knowing it was creating a credit bubble that (likely) his successor would have to clean up. He told congress time and time again that he thought the fed's monetary policy was appropriate, when we now know it led to historically epic disequilibrium, yet some people selectively choose to ignore or gloss over the most substantive and misleading comments of his, as if they aren't relevant or important.
Greenspan admits that he was WRONG in assuming that Real Estate was a LOCAL market and would never affect the national economy. He also was looking exclusively at wage pressures and saw no wage growth that would make him feel that a "bubble" was occurring. As we all know, he was WRONG and WRONG. His embracement of Ayn Rand ideology to the extreme and thinking that markets would not fail, or distort was how he arrived at being so WRONG. He was very hands-off and laissez-faire. I believe that Congress gave him (the Fed) authority over the mortgage market in 1991, but he did nothing. He felt that markets self-regulated. WRONG again Alan!
I'm glad he's saying this because there are some people who still dont understand that he's evil lying scum
Until one can demonstrate there was truly a housing "bubble" then the Fed causation argument is fallacious. Rates are just as low under Bernanke as they were under Greenspan. Where's the Bernanke bubble? Alive and well. Unfortunately while I live in South Florida where prices have slid dramatically-many other parts of the country have seen scant, token declines in prices. Anyone here see a recession let alone collapse in real estate prices on L.A.'s Westside? Or Chicago's North Shore? Heck, even in SoFla where home values have been slammed things aren't exactly cheap. Even in the worst performing real estate markets-home prices have fared better than stocks. What was your house worth in March of 2000? And where was the NASDAQ Comp in 2000?