Old Trader, You point out some correct facts about Greenspan, but i'm likely older than you and i have apparently mislaid my rose colored glasses. It is ridiculous to ignore the fact that Greenspan's policies are responsible for what will become the worst real estate, construction, housing, building-materials, and mortgage industry collapse since the great depression, not to mention the fallout in the banking and investment sectors world-wide. And that's also not mentioning his dereliction of duty during the great tech bubble which should have been cooled down via margin rates, despite Grenspan's incorrect assertion that dickering with margin rates would not be very effective in cooling the market. Under his "leadership" $7 Trillion in market capitalization was lost between March 2000 and mid 2002! Don't tell me retail traders and investors were not hurt by that. I don't know who was the worst Fed Chairman, but certainly Greenspan has to be a worthy candidate for that honor. P.S... I should also mention that Greenspan was instrumental in propelling (well "propel" is probably not the best word here) Mr. George W. Bush into the White House for a second term. Each must decide whether that was a good or bad thing to do, but I know where i stand.
I don't want to be unfair. Though i think, on balance and for the reasons i've stated in my post above, Greenspan was not a good Fed chair, he did perform reasonably well during several crises such as the LTCM collapse.
nothing was learned from the junk bond scandal in the '80s... part 2 is now upon us..... sure ...Republicans are mostly hands off when it comes to financial markets and screw things up when they do pass laws... Sarbanes Oxley for example..... now there is talk of Fannie/Freddie guarantees for home loans up to $1 million so the taxpayer is on the hook for the defaults.... more devaluation...........
the federal reserve doesn't control mortgage rates, that is controlled by the free market and the interest on long-term bonds, his rate cuts had little to do with the boom in housing(they control short-term interest). the fact that the tax code encourages home ownership(through tax deductions and tax free capital gains), a high demand for long-term treasury and mortgage securities and low inflation sent long-term rates down creating the boom not greenspan
Where do you suppose the trillions that banks loan come from? Personal savings accounts? I hardly think so.
Problem is, any time the Fed cuts rates, the assholes in the lending industry start an advertising explosion of how rates are lower, blah blah blah "OH MY GOD, THE LOWEST RATES EVER! REFINANCE NOW! BUY NOW! MORE CREDIT!!" So it's not necessarily the Fed that is controlling the rates directly, but the banks start advertising like crazy any time there is a rate cut, so these ignorant moron sheep start taking more and more credit because they don't know any better, just that Suze Orman told them to get a refinanced fixed rate mortgage or some shit or a consolidation loan because rates are so low.... So they (the Fed) know damn well what the results of their lowering the rates will be, even though they may not "directly" control the rates and the market... I work in mortgages and lending and see this crap all the time, it's nuts. It is truly sad to have a face to face look at all these morons who are nothing but sheep/consumers. Totally under control by CNN/Suze Orman/MTV/Infomercials/HGTV, etc. Maybe it's just me because I am constantly surrounded by these idiots who have no clue about money management or how credit is designed to work, but man, especially with it being the holidays....ouch. Bankruptcy attorneys will be getting rich soon, even moreso than now. We need to just let the market do it's thing and allow Darwinism to work its magic.
show me the data where you demonstrate that the money lent came from the fed's dicount window, if you cant then by definition it came from depositors
Excellent Commentary All............. ........................................................................... This is a really interesting question...and because of the fact that each man faced different circumstances...and a changing platform from which to operate....makes it really tough ...and lack of information...makes this a tough call.... First of ...the question should be posed as to what are good conditions...and what are not good economic conditions... Savings under Greenspan...paid as little as under 1%...which meant that retirees had to have $1000000 in cash to create less than $10000 in taxable income....Certainly this is not normal...and under Carter...retirees got over 18% for 90 day bills... certainly this is not normal...seeing how most of the best companies sought along the lines of 15% with quite a bit of risk... Thus the fact that everyone was pushed towards credit under Greenspan...and obviously 18% 90 day tbills are not sustainable...when the best businesses do not make this margin...are rather unwanted results of economic policy... Questions like...how is it actuarially possible for baby boomers to retire...or create adequate funding for retirement...and their reliance on a failing program to help them out called social security....The answer is that more families will be living together...just as they do in other countries.... ................................................................................... Another thing is that ...you know...just like the case with Thain taking the position of Oneal... How can Thain not look good...when starting from the bottom ? .................................................................................... Thus if a newly appointed chairman starts at the bottom or top of certain economic conditions....just as Bernake has stepped into the top of a credit bubble....things may get very very bad...and a lot of people will create political havoc for him....however he may actually be doing a fantastic job.... ...................................................................................... In my opinion...Bernake needs to raise interest rates and protect the dollar.....if he does not....this will only prolong economic normalcy....normalcy being that savings are rewarded...and credit is more scarce than under Greenspan... Credit bubble = Greenspan bubble = transferred 2000 market losses...and then add some substantial real estate losses amplified by derivatives... What was a $7 trillion problem...is now a $17 trillion problem...and if passed on to the next level...will grow even more... Where Greenspan was certainly lacking...was the failure to curb the risk of derivatives...as their systemic risk to the economy was/is a very real risk...in the sense that now credit is used like savings...and credit is shut down to the tune of several trillion dollars....this is certainly an amount that should have been seen....by a truly good chairman....as it was seen by Buffett... And also having to push 90 day rates to above average returns...should have been a slower moving and more stable process.... .......................................................................................... In either case...the problems came about by heavy interdependence on other countries turf...whereby the control is in somebody elses hands... .................................................................................... Making a judgement about a chairman should include of course the after-effects of his policies...as well ...as the after-effects of the relinquishing chairman... Also seeds planted today...may not bear fruit for 20 years... or even more.... ........................................................................................ Personally...My opinion is that Bernake should push a 10% consumption tax....and eliminate all other taxes...This is one of the few ways that the US can quickly increase its foothold in the World economy...If it becomes a tax haven .....There is absolutely no stopping the USA... Also Bernake should suggest taking out all the stops that keeps the US from being energy independent... I view the current US position as being on the low side...and with just a few tweaks...will take off like a rocket....one reason being is that its problems are well known....and it has the ability to change faster than countries such as China...when it so chooses... One only has to remember the focus of the human energy when the Twin Towers fell down....or World War II ..... This time however ...wealth from capitalism needs to be shared more...in the form of shares that trade on an electronic exchange...This promotes efficiency and spreads wealth...and creates the highest values....
to a point, but recall that the Fed. stopped issuing 30 year paper for awhile which caused a pile up of money looking for some kind of duration and 10 year rates crashed and home buyers were all the happy.... if a government prints money like this, the Treasury is 70% to blame but the wink came from Greenspan and the rush was on.....
I think that would be the single most effective thing that could be done. The other ideas I like too...But I think that a consumption tax in lieu of other taxes would change everything.