Greenspan to Bernanke - You're Becoming Irrelevant

You have to wonder if the former Fed Chair has any personal warmth for his successor. Judging by Greenspan's column in yesterday's Financial Times, the answer would be no.

Although Greenspan's ability to move markets has waned in recent months, he's still a news maker. So why is he trying to capture some of the attention on Fed decision day by allowing the FT to run his op-ed? Especially with this choice paragraph (emphasis added):

It has become hard for democratic societies accustomed to prosperity to see it as anything other than the result of their deft political management. In reality, the past decade has seen mounting global forces (the international version of Adam Smith's invisible hand) quietly displacing government control of economic affairs. Since early this decade, central banks have had to cede control of long-term interest rates to global market forces. Previously heavily controlled economies - such as China, Russia and India - have embraced competitive markets in lieu of bureaucratic edict. The danger is that some governments, bedevilled by emerging inflationary forces, will endeavour to reassert their grip on economic affairs. If that becomes widespread, globalisation could reverse - at awesome cost.

To be fair, according to the latest research, Greenspan is on the right track in stating that the impact of monetary policy has been dulled over the last two decades thanks to globalization. But in picking today to make the point, you get the sense that Greenspan is becoming the Michael Jordan of central bankers -- he can't quite allow himself to let go of the spotlight. 

He also took a swipe at Bernanke last week on CNBC, saying that the Treasury Department, and not the Fed, should have backed the sale of Bear Stearns (BSC) to J.P. Morgan (JPM) in March.

"What we should not have is the central bank involved in its balance sheet," he said. "Because that balance sheet is the creator of the monetary base and if you allow major fluctuations in that base as a result of other-than-monetary-policy reasons, I think you're taking undue risks with the notion of the stability of the financial system and very specifically the Fed's control of inflation."

There are other former Fed members who refuse to talk to press on decision days. Writing an op-ed amounts to a similar type of communication. Should Greenspan follow the example of his peers?

Comments

[User 49945:]

Greenspan is so full of himself it's ridiculous. That idiot has shown that he can't even manage his own kids' piggybank, much less our country's financial system.

He totally destroyed us for years to come. What it will take to undo his mess is going to shock us for generations to come, I fear.

I wish they'd quit giving him so much air time. Maybe then he'd go off and crawl under a rock, which is where he belongs.

2008 Aug 06 09:34 AM

[seahawk:]

Yea Greenspan is sounding more and more like a certain Peanut farmer we know.
The guy has no class.

2008 Aug 06 09:44 AM

[notsosmart:]

user-u r so right!

2008 Aug 06 10:38 AM

[Jason Rines...:]

I would have a lot of respect for Greenspan if he came out and said that his Friedman economic influenced decision making and advice to U.S. Administrations was wrong and that out of recent failures, this is what he has gleaned. Greenspan is not dumb but yes agree he became used to the spotlight. It is hard to ascertain if he is attempting to redeem himself to a degree for the damage he caused or if he just wants air time. There is more then meets the eye here beyond culpability, just not sure what it is yet...

2008 Aug 06 11:05 AM

[Mazel Tov:]

Greenspan needs to follow his peers and not make comments on decision days. He stepped down from his position convieniently before the crash of the financial industry probably becuase he had a good idea of what was going on and did not want to deal with it. He knows a hell of a lot more than most of us but he needs to stay out of the spot light and let the FED do their job.

2008 Aug 06 12:03 PM

[jarcom:]

Unfortunately, Greenspan is probably correct in his concern that the Fed has exposed its books to the likes of Bear Stearns soft assets. I agree about the dubious timing of his commentary.

2008 Aug 06 02:37 PM

[TinyTim:]

Since early this decade, central banks have had to cede control of long-term interest rates to global market forces.

I read this as "not my fault, I had interference to deal with"
Too bad Volker isn't doing more talking

2008 Aug 06 02:49 PM