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The Maestro makes his getaway

So Easy Al has ended his tenure leaving the house of cards still standing. I'm impressed, really, I thought it would collapse during his watch. He's managed to get out in time and leave his successor, Ben Bernanke, to take the blame when the great teetering structure comes crashing down.

I've written about what I believe are the problems in the world economy before, so I'm not going to repeat them again, but it's important to understand Greenspan's role in it. Bill Fleckenstein tells how he sees things:

Alan Greenspan gave a speech last year titled "Economic Flexibility." It should have been called "Damn, I'm Good," because the world's biggest serial bubble blower -- and most incompetent, irresponsible Fed chairman of all time -- tried to rewrite history. This column will endeavor to set the record straight.
Read the whole thing.

And Stefan Karlsson is not a big fan either:

[A]part from inflation and economic imbalances, the defining characteristic of the Greenspan Fed has been its dishonesty. We have already seen how Greenspan claimed to have mimicked gold standard conditions. Moreover, instead of admitting how he was responsible for the tech stock bubble through the creation of moral hazard and suppression of interest rates, he blamed the bubble on "irrational exuberance." And instead of admitting his role in creating the housing bubble, he denied that there was such a bubble. Later, when he admitted that the housing bubble was real, he spoke out against it as if he had nothing to do with having created it in the first place.
This week will see a great wash of articles and retrospectives tripping over each other to lavish the most praise on Greenspan. Hopefully I've given you a reason to be a bit skeptical.

UPDATE: The New York Sun also has a timely editorial on his legacy that's well worth a look.

Comments

I dunno, I wouldn't blame bubbles on this guy. Yeah, his policies might affect it one or another but it may be that no interference is better because it makes the bubbles pop faster. But no matter what he does human beings are going to make bubbles.

Nah. I'd say he deserves his share of the blame. His response to any crisis was to blast liquidity everywhere, rewarding recklessness and damaging the critical feedback loop that is at the heart of capitalism. You can win big, but you can also lose -- invest wisely.

The result of his numerous interventions is a world economy that is dependent on the US continuing to go further into debt -- and of finding national banks willing to finance that debt. It can't go on forever, and so it won't go on forever.

It's true it won't go on forever. But I think he is betting (like the US government) that when it falls apart the people who are going to get the shaft bigtime are foreign governments, which suits the US just fine. Everybody has an interest in keeping the US healthy and they are milking that - as they should.

That's a good point. The larger culprits responsible for the problems in the world economy are the foriegn central banks that keep hording the US dollars in order to keep their currencies low and their exports high.

I have a theory that a government intervention in the economy (obviously a government can only intervene in their own economy) will hurt them more than it hurts other nation's economies. So the softwood lumber duties the American's have imposed on Canada hurt our lumber producers, but hurt Americans more, because they're denied cheap lumber.

Similarly, the interventions in the currency markets by the Chinese government to keep the yuan cheap work to impoverish their citizens by keeping their wages low. When the US dollar goes bust, the Chinese government will be left with a lot of paper, and the Americans will be left with landfills loaded with broken Bratz toys and obsolete electronics.

What the hell am I talking about? I think I need to go lie down...

Mmm, Bratz toys. It is also possible that every important metric used to measure this stuff is completely wrong and that the US (or certain guys, like Greenspan) are betting against the actual data while officials in Communist places actually believe all that GDP crap.
http://www.businessweek.com/magazine/content/06_07/b3971001.htm

If it turns out that what governments are using to measure this stuff is totally wrong - and that seems likely - then the US is sitting even better after a bubblebust. We got stuff, the rest of the world got paper.

Most importantly since the US is free they used their freetime from not having to produce LittleSlutz toys by hand to produce stuff that is actually useful and is driving the future. The unfree world, as always, is one revolution behind.