Fed's Massive Stimulus Had Little Impact: Greenspan

http://www.cnbc.com/id/43598606

The Federal Reserve's massive stimulus program had little impact on the U.S. economy besides weakening the dollar and helping U.S. exports, Federal Reserve Governor Alan Greenspan told CNBC Thursday.

In a blunt critique of his successor, Fed Chairman Ben Bernanke, Greenspan said the $2 trillion in quantative easing over the past two years had done little to loosen credit and boost the economy.

"There is no evidence that huge inflow of money into the system basically worked," Greenspan said in a live interview.

"It obviously had some effect on the exchange rate and the exchange rate was a critical issue in export expansion," he said. "Aside from that, I am ill-aware of anything that really worked. Not only QE2 but QE1."

Greenspan’s comments came as the Fed ended the second installment of its bond-buying program, known as QE2, after spending $600 billion. There were no hints of any more monetary easing—or QE3—to come.

Greenspan said he "would be surprised if there was a QE3" because it would "continue erosion of the dollar."

The former Fed chairman himself has been widely criticized for the low-interest rate policy in the early and mid 2000s that many believe led to the 2008 credit crisis.

Bernanke, who took over for Greenspan in 2006, began implementing the quantitative easing program in 2009 in an attempt to unfreeze credit and prevent a collapse of the US financial system. The strategy has gotten mixed reviews so far.

On Greece, Greenspan said a default is likely and will "affect the whole structure of profitability in the U.S." because of this country's large economic commitments to Europe, which holds Greek debt. Europe is also where "half the foreign [U.S.] affiliate earnings" are generated, he added.

"We can’t afford a significant drop in foreign affiliate earnings," Greenspan said.

Greenspan was also pessimistic about the U.S. deficit talks, saying he didn’t think Congress would reach an agreement on raising the debt ceiling by the Aug 2 deadline.

“We’re going to get up to Aug 2 and I think on that night, we are not going to have the issue solved,” he said.

If that happens, he said, the U.S. would have to continue paying debt holders or risk major damage in global financial markets. As a result, “we will default on everything else.”

He added: “At that point, I think we’ll all come to our senses.”

 

Since when have we started listening to Greenspan?

 

Because once these guys leave "office", whether they be pols or chairmen, they suddenly develop a "conscience". All of a sudden, they start making sense and stop speaking in riddles.

 

That doesn't make any sense, really...

 

All this shit falls at his doorstep - not that he kept rates too low, too long, but that he raised Fed Funds 400 bps in a yr and a half. What did he think would happen to all those ARMs that would be reset by this?

If he thinks the economy sucks, well it started with him.

 

The funny thing is... he spoke clearly, quantitative easing sucks, the debt ceiling is a tough issue and greece could hurt profits.

 

Bailouts in the 1930's didn't work! Nobody is allowed to understand that of course. The US had the biggest bailouts and were the last to exit the depression... there was a massive economic downturn in the early '20's about which nothing at all was done and the recovery took not very long and it was strong... Government stimulus is favored by the political class because it works for them, not for the economy. They get to have all that money going through their sticky fingered hands... they dole it out to their pals. Obama gave his organizing associates a cool $Billion and a little later on they just disbanded, no particular accounting for the money was necessary apparently because I don't see any news stories about it

 

What if the fed did nothing in 2008?

Margin call, liquidation of the fat and over extended organizations would have resulted in the emergence of new leaner organizations. AIG bailout was a total scam on the tax payer... The parties that ultimately benefited were offshore investors and US companies investing from offshore subsidiaries.

Even the foreclosure mess would be easier to settle and sort out through the bankruptcy courts.

In essence we provided rotisserie chicken to the foxes we have guarding our hen house.

 

The bailouts and stimulus were just hiway robbery of the of the people's money. Every congressman and senator who voted for spending those funds should not only lose their jobs but should face a firing squad. Same for the Presidents who spent it.

 

They're only puppets while they're in power. These guys actually went to school and actually got their expensive degrees. It may not seem like it when they're in office but they actually do know what they're talking about. They just don't say or do the right things.