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The latest dire warning from gloomy Greenspan: "The markets will crater if we run into any...
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Saturday, November 17, 2012, 8:25 AM ETThe latest dire warning from gloomy Greenspan: "The markets will crater if we run into any evidence that we cannot solve [the fiscal cliff]... If we get out of this with a moderate recession, I would say the price is very cheap." Joe Weisenthal thinks the former Fed head is deeply misleading: "He's framing the cliff 100% backwards... Right now there's one task: preventing austerity."
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Alan, after getting us into the mess you created, just go away to some old age home and do the crossword puzzles.
What makes me sick is Greenspan walking around like he did nothing wrong.
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He is going around like he did nothing wrong, because he did nothing wrong
He did not get you in this mess. You are this mess
Smarton pretty much summed up my thoughts.
One cannot forget Greenspan's policies and lack of oversight got us into the mess.
For here on out, I am going to use the term "spending binge".
I wouldn't mind hearing the word 'reform' a little more, either.
"Preventing Austerity" has been voted the new National Anthem of Greece, if I am not mistaken.
Greenspan should be in jail for being the architect of the world's greatest collusion and racketeering operation which benefited him and his cronies (Wall St.) to the tune of billions.
Go away!
I also "knew" Greenspan as a private consultant in his pre-Fed days (in the sense that I would be in the room listening to his commentary). His grasp of numbers and ability to articulate them has always impressed me, but as a market guy he was not the best.
Yet perhaps the main reason for my comment is that for the first time, I thought that age was finally starting to betray the former Chairman. Just an impression.
thanks for the help , Einstein
We have the same government structure that we had 20 years ago - only larger. The same agencies only more. The same rules only more of them. The same bureaucrats looking for reasons to exist and expand, only more. The same paperwork requirements, only more.
I don't care if we call it austerity. I don't care if we call it reform. It doesn't matter to me what the terminology is.... we will have a true cliff for our children and grandchildren if we don't reduce the size and scope of our federal government.
If I misfile a form or an idiot bureaucrat actually loses said form - you can damn well bet I'll be getting fined and subject to an "increased level of oversight" for a period of time.
Now if I commit fraud on the scale of billions on behalf of a large corporation - then my firm will get billions in bailouts and I'll keep my job for years and years - continuing to collect my big salaries and bonusses - all because I'm part of "systemic" risk.
Our president is a law professor - seems to me he would have wanted to actually see more than four people go to jail?
In reality, the US does not face a cliff, fiscal or otherwise, at the midnight on December 31st but rather is in the midst of a long duration political legislative impasse. The damage caused by that impasse is great but is being imposed incrementally (i.e. has been ongoing for almost 4 years and the end is not yet clearly in sight). Insofar as the artificial December 31st deadline can be said to create a 'cliff', the failure of the President and Congress to show in the near future (say within 10 weeks or so) a capacity to work constructively together would cause a serious loss of confidence by the nation and world.
Ben coined the term fiscal cliff.
Someplace behind the fiscal cliff we have the Great Drop Off once we leave the fiscal Continental Shelf. That will be a drop off.
In reality it wont be that dramatic but we will just grind lower and lower. And with a lot of noise.
The housing bubble is really not loose monetary policy. That was simply bad credit underwriting. Whether policy is loose or tight if you don't do solid underwriting the losses will be enormous.
Criticizing him on loose regulations is likely more warranted. But then in fairness throw in Clinton, Bush and hundreds of congress people.
Hating on Greenspan is just a waste of time and misdirected. And that is emotion not analysis.
But, I am not optimistic. Few understand delayed gratification or asset accumulation via saving rather than leverage. Leverage is a bit like heroin. It can be used wisely for pain and compassion or abused until the user is dead. So far, the diagnosis is in but the patient has not significantly changed their habit.
In a democracy the sheep are responsible. And they cannot be called sheep when they pull the lever at the ballot box and go to the bank and borrow more and more. Our government reflects the peoples' will and if you don't like how the government has behaved then take a look who is doing the voting.
The primary incentive is "if you want to get elected give me money."
"Fed colluding with big finance" is simply a way to deflect blame and not look in the mirror.. And plenty of stupid people in finance who did not survive the meltdown so it was a real poor job of collusion.
If you're a person who believes the wolves should always win, and the sheep should fend for themselves, your position makes sense. If you think society prospers when everyone prospers, you should cry "wolf" when you see one.
Secondly, the sheep did not elect Greenspan. No matter what party was in the white house, Greenspan stayed. Again, can't blame the voters.
The new republican line of the "47%", and "Obama won because he gives poor people things" is asinine. How about: "you only get elected if you give giant subsidies to big business, and are in bed with the financial industry, etc, etc"? We all know that's how politics works. It's a real wonder it didn't work out that way in this case, with Citizens United and all (of course Obama is just as much in the pocket of finance as Romney would be of his own accord, so it's only a small wonder).
But it's not "welfare" and "socialism" when free money is given away to the largest monopolistic corporations, or they get to pay zero taxes (same thing). No, it's corporate cronyism, and it's a perfect way to allocate society's resources. And of course rich people and rich corporations NEVER ask for handouts... I'm THIS close to calling names at this point :P Wake tf up!
The people elected congress and they set up the Fed. Both parties give away money. Both are enabling bankruptcy. Both are at fault. And people keep electing them.
You are like most people who want to slap someone else awake as it is someone elses fault. Slap yourself awake fool.
Hate is the not the word I would use to describe how I feel about Greenspan. He may not have been the sole cause of where we are today but he was certainly one of a few who could have prevented it.
Brooksley Born went to Greenspan concerning credit default swaps and he completely ignored her. He had Larry Summers call her and threaten her to stop what she was doing. When she did not stop and actually tried to enact laws to regulate those instruments, she was discredited in front of congress by both Summers and Greenspan and the CFTC was stripped of its powers.
Many others approached Greenspan during the housing bubble but he never admitted that there was a problem and stuck to his ideology that the market would sort it out on its own.
That and dozens of other cases prove his stubbornness and complete lack of knowledge regarding how the markets work in the real world as opposed to his theoretical approach.
So, some words I would use to describe Greenspan: stubborn, bull-headed, narcissistic, negligent, self-centered, bully, and ego-minded but not hate.
I don't disagree in full with anything you said.
I would fault him for not erring on the side of cautiousness. Yes people seek their own interests in aggregate and they do a pretty good job and better than centralized powers manipulating markets and players but an infallible belief in the wisdom of crowds has not borne out IMO.
It is a very delicate line to walk between regulating to prevent problems and stepping all over the economy and players and crushing innovation. Especially when the economy is complex and advanced like the US.
Interesting though that Summers was also in the mix as well as Bob Rubin and many others. Dems and Reps both were reticent to think about regulation much which had a number of reasons behind it not the least of which I don't think many of them really understood the economy and business like they think they do.
I would also note the lack of business experience by most if not all of these players. Nobody ever really worked in the markets but they thought they were all experts. Hilarious.
Where he entirely failed was in understanding how his prolonged interest rates were interacting with political actions and his lack of understanding where additional regulation was needed in financial markets.
We had several problems as it related to the housing market. Low interest rates, fraud on a massive scale at many levels in the housing market (much of it at the lowest level so that brokers and agents could get their 5-6%), derivatives that few understood - again basically so some could get their cut, simply stupid legislation forcing banks to loan to certain constituents, and an unwillingness to address underlying economic problems that were being obscured by the housing boom.
It comes down to leadership. Greenspan deserves his share of the blame. Some of it simply misjudgement. But where I really fault him and, even more, Bernanke is that they sit in front of congress and don't tell the American public the truth. That Congress is actually the enemy of the average American - lessening the future of our children and grandchildren, while they enrich themselves while spending like drunken sailors.
Here is my take on the housing loan marketplace as well as any other loan business. Rates go up and down and enthusiasm waxes and wanes but solid underwriting practices must be adhered to. Loaning money to people who cannot pay it back is a disaster no matter the rates. Simple things like 20% down would have avoided the housing debacle and done away with the fraud, etc but the housing market was driving tax revenues and employment and political goodies so politicians loved it.
Fed Chairmen have always massaged Congress because that is their boss ultimately.
Your description of Congress is harsh but appropriate.
I don't think my comments on Congress are harsh at all. They have a constitutional duty to pass a budget each year. Three years of failure should bring the inside of a jail cell IMO.
I was never in favor of term limits but I'm beginning to feel that given the amount of gerrymandering that exists we either have to fix that problem or enact limits. A law should be passed that forces Congressional districts to use only the state boundary (including rivers/sea/etc, and at least two straight lines and no more than three. That is the only way we'll end up with representatives that actually go to Congress and represent the people - not the idiots on each end of the spectrum. We should have a goal of having as many competitive districts as possible not the other way around.
I would have to disagree that Fed Chairmen have always massaged Congress - I listened to Volker tell them to basically stick it (in nice language) when he did the tough medicine needed to corral inflation in the early 80's.
The truth is, that starting with Reagan, republican administrations ballooned deficits each time. So much for small government. Obama is continuing the ballooning, but it can be argued that he doesn't have much of a choice if he wants to avoid a global depression, given what he inherited. Still plenty of room to blame him for unnecessary military and war spending.
Please get beyond, "All Democrats are good, all Republicans are bad." Clinton worked with a Republican House to clean up the welfare mess and Reagan worked with a Democrat House to clean up over-regulation.
Come to Illinois and I'll introduce you to many (most) from both parties that would make you hold your nose. The last two Governors, one Republican and one Democrat, both sit in Federal Prison. And if you go to Chicago, or read their critical stats, after seventy years of exclusive Democrat control their stats read like a poor third world country.
Money talks and BS walks. In Illinois, the politicians are walking.
It can be argued that the world is in this mess because of the culture of deregulation and financialization started under Reagan. But that's not a dissertation that would fit on this comments page.
Insider trading? Yes, they're enforcing that.
Things that Jon Corzine should be indicted for? Well, no.
While Corzine was born here and a big name Dem?
Corruption right in front of your face.
We don't need stupidly low interest rates. 2.5% would be fine. We we need is low government spending. The generations responsible for this mess are the ones that should have to suck it up and deal with the pain/fallout.
Greenspan oversaw a equity market bubble in 1999 that resulted in the seedlings of a real estate bubble and financial crisis that was only partially popped in 2008. At each turn, exceedingly low interest rates influenced a "spend now, pay for it later" belief that was compounded by a lax regulatory and enforcement environment.
And Mister Greenspan knew all too well of the environment to which he was enabling that behavior.
Bernanke, in my mind, is perhaps even a worse creature-- as his Federal Reserve has somehow managed to usurp more power over those same institutions he has treated with kid gloves. In addition to that, Bernanke has "done his job" by enabling increased deficit spending by massively intervening in the credit markets.
As a result, we may well see a more massive structural dislocation due to Bernanke's destructive actions... allowing Greenspan, perhaps, to a less onerous footnote in history.