Jim Roger's Article on Greenspan

Discussion in 'Economics' started by Reverend Trader, Nov 4, 2002.

  1. great article
  2. very excellent work. thanks for posting.

  3. This is very similar to the regular tirades Bill Fleckenstein vomits up about Greenspan. At least Fleck was complaining at the time, I don't recall Mr. financial Genius Jim Rogers, whose Barron's picks would have bankrupted the avergae cnetral bank, saying anything.

    The fact is Greenspan made soem mistakes, but he was far from the creator of the flawed policy. That would be all time greatest treasury Secretary Bob Rubin, about whom the liberal media will never utter a negative word. It was Rubin who orchestrated the Asian, Mexican, Argentine and LTCM bailouts. Greenspan was put in the spot of either going along, or being blamed for the inevitable debacle. And let's face it, Greenspan's life altering moment was when he "saved" the markets in October '87 by flooding it with liquidity. He was able to save the financial industry after the S and L crisis by calling the same play. So it's not like he was inventing electricity here. It was SOP. No doubt Greenspan's desire to be reappointed influenced his judgment as well.

    There's plenty of blame to go around here. Funny how it all sticks to an old guy who will not be in a position to help or hurt anyone soon.
  4. Babak


    Come on!

    Greenspan made more than a few mistakes. He was the chief cheerleader of the mania. He kept harping on the 'productivity' miracle that the US was supposedly experiencing....that turned out to be a statistical mirage.

    He quoted stock analysts and based on their aggregate opinions defended the stock market bubble in front of hearings.

    He is a bald faced liar because he is on record (minutes of meetings) saying that there was a bubble and that raising margin rates would prick it. Then he stated in a speech that there was no bubble and that there is no way to recognize one, until after the fact.

    I don't like to kick an old man when he is down and when more and more people are recognizing his true colours....but come on! the guy was totally responsible for what went down.

    He was in a position where he could have easily taken action to change the course of history. But he didn't. All he did, ever was copy Shiller's phrase "irrational exuberance" after a conversation and use it in a speech in 1996.

    After the investment industry went on the warpath and screamed bloody murder, he backed down and returned to his usual position of kissing their asses.

    Greenspan will go down in history as one of the worst Fed Chairmen the US has ever had. It will just take some time for people to realize it.
  5. welp, I think Mr. Rogers overstates his case. I also think he's wrong about Mr. Greenspan.

    Mr. Rogers attributes godlike powers to Mr. Greenspan and is obviously cranky that the Chairman couldn't deliver according to his expectations. Mr. Rogers seems to forget that players in an economy are free agents, not automatons that are controlled by FOMC actions.

    People seem to want to blame someone, and The Chairman is as ideal a target as any. Human nature is really fickle. I remember when The Chairman was being universally hailed as an economic saviour...

    Woe to those who are made into gods only to be proven mortal. Mr. Rogers ought to be more selective in choosing his deities. He might not be so disappointed next time.

    And I guess we'll never know how things would have gone if Mr. Rogers was the in the Chairman's position. But that won't stop him from insisting that he'd have done a perfect job.

    Nice bowtie, Mr. Rogers.
  6. "Once stock prices reach the point at which it is hard to value them by any logical methodology, stocks will be bought as they were in the late 1920s - not for investment, but to be unloaded at a still higher price. The ensuing break could be disastrous because panic psychology cannot be summarily altered or reversed by easy-money policies."


    “I recognise that there is a stock market bubble problem at this point, and I agree with Governor Lindsey that this is a problem that we should keep an eye on.”


    “We do have the possibility,” he continued, “of raising major concerns by increasing margin requirements. I guarantee that if you want to get rid of the bubble, whatever it is, that will do it. My concern is that I am not sure what else it will do. But there are other ways that one can contemplate.”

  7. The simple fact is that Greenspan shirked his duty and caved in to popularity pressures. He can't claim the stupidity defense because, being a smart guy, he amply demonstrated his knowledge of history a long time ago.

    Greenspan knew all along that stockmarket bubbles are prone to develop in "goldilocks" inflation scenarios, i.e. during periods where all is well. A benign inflation environment is needed for a stock market bubble to develop in the first place, because conditions have to appear near perfect in order to spur the credit lenders into getting extra jiggy. You cannot separate an inflation watch from a credit/lending watch because they are joined at the hip.

    Coincidentally, the ECB is now making the same mistake in reverse. They are stupidly clinging to a high interest rate in the name of price stability even as Germany is sinking into deflationary quicksand. ECB excuse? Business conditions are "not part of their mandate." That's like a football team saying oh you mean we have to play defense too? Ohhhhh.....

    The idea that asset prices are independent of the macro situation in regards to interest rates and inflation is completely ridiculous, because bubbles only happen in benign situations. GREENSPAN UNDERSTOOD THIS AS FAR BACK AS 1959, and so for him to sit on his ass and say "golly gee, the smart money sure fooled us didnit hyukka hyukka" is a disgusting abrogation of responsibility and completely BS rejection of a simple principle that HE ALREADY KNEW AND UNDERSTOOD.

    Fed governers are SUPPOSED to be unpopular by definition. They are SUPPOSED to take away the punch bowl when the drinkers get too rowdy, and it is understood that greedy bankers WILL get too rowdy if given the chance and egged on by the public, this has been known for DECADES, that is the WHOLE POINT of managed monetary policy in the first place. For Greenspan to completely ignore that mandate, and to whine about how "the smart money fooled us" is just plain STUPID. I doubt we should even have central bankers, but if they are going to be AROUND they should at least do what their job was CREATED for.

    So, because Greenspan didn't want idiots like Steve Forbes and the WSJ to call him names, he decided to blow off everything he learned and go with the flow instead. That jerk not only shut his eyes to the bubble, he pumped it up further with pep talks!!!! And now people are getting laid off all over the country and retirees are wondering if they'll end up working til age 80 or sleeping in a bus shelter.

    Greenspan may be a nice, intelligent man. Jimmy Carter was a nice intelligent man too, that didn't stop him from being one of the flat out worst presidents ever to come down the pike. I think Fleck and Rogers pegged Greenspan exactly right. He has screwed hundreds of millons of people for reasons of ego and appeasement. Maybe he got senile, who knows. But when you have that much power and responsibility concentrated in your hands, there is absolutely NO excuse for shirking lessons of history, lessons that you have learned long ago.
  8. sabena


    Rational decisions cannot stop mania's from happening...
  9. right now in socal, there is a mania in real estate... whats interesting is that people feel (again) that it is different this time... reasonable enty level homes in modest areas are $400,000 in north san diego county... tract homes in areas with the better school systems are probably $600,000 or more... okey, whats funny to look at is that the payments havent skyrocketed due to lower interest rates, only the debt has....

    so do you want to buy house "A" for $200,000 with a payment of "X" or do you want to buy house "A" with a payment near "X," but at a price of $400,000... what you do not want to do is pay cash for the $400,000 house?

    apt investors are exchanging into bigger projects as new investors overpay (my opinion) for smaller "plex" properties. the whole food chain ratcheting higher at big jumps!!!! not really trending. go in the units in blue collar neighborhhoods - dining areas converted to sleeping rooms, people living in closets and sets (yes plural) of bun beds in living rooms.... can 8 people really occupy a large studio or 1Br - note their cost is $100 a head, not bad... the only way these prooperties cah flow is with low interest rates - most of course are ADJUSTABLE... so occupancies are up, unemployment has been low, inmigration has been unchecked from the south, economy has been strong, blah, blah, blah..... have wages gains been strong - NO! is unemployment ginna increase? Probably! can people move to reno, portland, etc? Sure - when they lose their jobs! the leverage will work in the opposite direction when interest rates rise, expenses increase as "doubling up" increases and utility costs rise, vacancies increase (which lowers revenues and increases turnover costs).

    the impact of the loose money policy coupled with 11 rate cuts last year and another biggy recently indicates that maybe its as loose as its gonna get - are you gonna buy 30 years of risk for 3% to 4% divvy on a bond????? in U.S. dollars? Really?

    when i pick my children up from school in my modest sedan, the lot looks like a frigging SUV car lot.... all those $40,000 gas-guzzling depreciating assets!!!! i have been doing what i do for a long time.... friends ask me, why arent you buying apartments units????

    the answer: because this is going to get seriously ugly!!!! it may just turn out that there is no where to hide... i just keep banking money, i let the tenants pay off my properties and i have an overall debt ratio of less than 20% of my net worth (and that includes investment properties). and the debt is getting paid down fast too!
    #10     Nov 9, 2002