What is Greenspan doing? Ben Franklin once said “better to be thought a fool than to open ones mouth and remove all doubt”. Greenspan’s constant rhetoric is inviting a far closer scrutiny of his record and actions than would have happened had he just kept quite.
After his retirement in 2006, rather than just fading away and enjoying the years he has left, the 82 year old Greenspan decided he was going to become an author and prognosticator. His actions both spooked markets as the ordinarily unintelligible coded verbiage he used as Fed Head suddenly became crystal clear. Statements like prediction a recession with percentages of probabilities and criticisms of current head Ben Bernanke’s actions stunned investors and did nothing but add volatility to an already volatile market.
His ill-timed tomb in the midst of a crisis immediately after he left office did nothing but give those searching for a reason for it 1,000 pages of possibilities.
In the book he then went on the further denigrate his credibility when he wrote about Republican’s tax cutting as adding to the current environment. During Greenspan’s rein he was largely criticized by Democrats for his constant endorsement of tax cuts as an economic stimulus.
Now the critics attack Greenspan for being too lax on regulation and keeping rate far to low for far to long. On the first I cannot attack him. More regulation has never stopped abuses in the system. The reason is that determined people will always find a way around regulation and bubble will always exist somewhere. You cannot regulate away stupidity and yes, people who jump at “liar loans” were stupid. At least they were not as stupid as those who gave them the money.
If anything, more regulation does tend to stifle enthusiasm and innovation. Some innovation will be good and others bad, but without it, things do stagnate.
On the second charge Greenspan is guilty. Free money, given out for a long time, and that was what is was, will cause people to do dumb things with it, and they did.
One thing struck me recently. In a recent interview with the WSJ, Mr. Greenspan says he doesn’t regret a single decision. That is just not possible…
He did a job for 18 years and would not do anything different? That strikes me as an arrogance I have not seem in quite some time. Ever heard of self reflection? Greenspan is essentially saying he was perfect, either that or he is lying.
Even two members of the policy- making FOMC at the time (2004-2006) — William Poole and Robert Parry, presidents of the Federal Reserve Banks of St. Louis and San Francisco, have both recently argued that, in hindsight, rates were too low for too long. They both say this contributed to the housing bubble. On that Greenspan says, “I don’t remember a case when the process by which the decision making at the Federal Reserve failed”. He focuses not on events that followed the policy but on the thinking behind it. In other words, good intention trump bad results…
In the same interview he said “I was praised for things I didn’t do,” and “I am now being blamed for things that I didn’t do.” The question was not asked but I would love to know what things he got credit for he now thinks he did not deserve.
What Greenspan is doing is giving his critics fodder to attack him and his “would not change a thing” comment will lead him to defend decisions that were wrong (no one is perfect). This defense will taint all the decisions he made as a skeptical eye will now be cast over everything.
Alan, Ben had a point…
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