Where is Alan Greenspan Now?

Discussion in 'Economy' started by onedomino, Aug 19, 2007.

  1. onedomino
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    onedomino SCE to AUX

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    If there was one thing that was constant during Alan Greenspan's 20 year run as Chairman of the Federal Reserve Board it was his brilliance and ability to make the right interest rate calls at the right time. Now, his replacement does not look so good:

     
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  2. Toro
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    Alan Greenspan is making $100k a speech and watching his successor deal with the mess he made.

    I disagree with the assessment that Bernanke made a "rookie" mistake. That's nonsense.

    The problem is that Easy Al got the market addicted to rate cuts like a crack addict. His actions encouraged excessive risk taking because he instilled a belief in investors that the Fed will always be there to bail them out. Now, today you have over-leveraged hedge funds speculating in garbage paper that is worthless, which has caused a seizure in inter-bank and money markets.

    Bernanke is attempting, amongst other things, to re-establish a more appropriate risk premium in financial markets, one that has been sorely lacking until recently.
     
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  3. Dirt McGirt
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    Dirt McGirt Bad Mother****er

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    I'm kind of on the fence with the fed right now. I see both sides. Do we stop the protectionism and let the market play out or do we lower the rate and give home owners a way out through refinancing? Had homebuyers not overstretched themselves and done their homework, they wouldn't be in the mess they're in now. On the other hand, everyone and their moms talked about how great the economy was, which did influence the housing and lending market. Tough call.
     
  4. Diuretic
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    Diuretic Permanently confused

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    I read this brief article in our national Murdoch this morning:

    http://www.theaustralian.news.com.au/story/0,25197,22286300-5013451,00.html

    Of course it's produced for local consumption but it was interesting.
     
  5. onedomino
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    onedomino SCE to AUX

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    Crack addict? Hyperbolic "nonsense." There has been very little inflation over the past decade and no reason for interest rates to be high. Artificially high rates would have unnecessarily inhibited economic growth. Is that what you wanted? Under Greenspan's leadership the stock market eventually recovered after 911, and GDP consistently increased, while simultaneously the US consumer engine continued to drive world economic growth. All of which occurred despite rising energy prices. You cannot get a much better result than that; especially in light of the ridiculous spending behavior of the Bush Administration. Obviously it would have been better to not have blown half a trillion in Iraq, but that was not Greenspan's fault. You may not like Greenspan, but it cannot be because of his results, and his international reputation is unsurpassed. When I lived in Asia, from 2001-3, many people in China, Japan, and Korea thought of Greenspan as literally the smartest person in America.
     
  6. ReillyT
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    I don't know what an artificially high interest rate would be. After the stock bubble burst, Greenspan lowered interest rates dramatically to prevent a prolonged recession. That is fine, but all it did was transfer the stock bubble to the real estate market. Now this bubble has burst. I don't know enough to say that what Greenspan did was unwise, but the roots of the current problem do stem from the decisions he took while he was Chairman of the Fed. Perhaps if he had allowed the initial correction of the markets to last a little longer than he did, we would be in less of a mess than we are today. Just a thought.
     
  7. Paulie
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    Paulie Platinum Member

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    Perhaps if we stop letting a group of bankers use policy decisions to affect the value of our dollar, and return to a commodity-based standard for our currency, we won't HAVE to blame people for their decisions.

    with gold and silver being what they're worth these days, I sure would love to be able to take my devaluing paper dollar to a reserve and exchange it.

    But that would be too much freedom for us...the bankers can't have that.

    Better to let them set their ridiculous policies...at our expense.
     
  8. Toro
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    You say there is little inflation. There is little consumer price inflation - if you believe the official statistics. Greenspan legitimized the concept of "core" inflation, which excludes food and energy prices. Do you pay more for gas than you did five years ago? What about food? But that doesn't count in the Fed's focus on "core" inflation. Also, during Greenspan's tenure, the Fed changed the measurement of housing costs by measuring it as "implied rent", which is a function of interest rates. So while housing costs were rising 10% a year for five years, the Fed's "implied" housing costs rose 1-2% per year. Do you really believe that housing costs have only risen 2% this decade? Yet energy, food and housing account for ~40% of the CPI. No inflation indeed.

    But inflation is not the readings of an index of consumer prices. Inflation is the creation of money at a rate faster than the rate of economic growth. Consumer prices are an outcome, but it is only one possible outcome. Inflation also manifests itself in asset prices, which is the primary inflation of today. It is a folly of the central banks of our time to focus only, or primarily, on consumer prices as an index of inflation, and Greenspan was particularly guilty of this.

    In our time, the excess creation of money has not filtered into consumer prices, which is as much a lucky accident for Greenspan's experiment as anything. The inclusion of China and rapid technological advancement the past 10 years has had the effect of holding down consumer prices. With such exogenous factors, that excess creation of money has filtered into global asset prices. Have you ever wondered why the price of housing has skyrocketed on virtually every place on the planet? Look no further than too much money in the world. How about the price of gold going from $250 to $750 in 7 years? Do you think that is accident. Stocks, bonds, real estate, gold, silver, commodities, art, wine, etc., all of it has risen at rates sometime 2, 3, 4 or even 6 standard deviations away from the norm.

    Why does that matter? Because distorted asset prices create misallocations of capital, which has effects in the real economy. By chance do you live in Silicon Valley? The severe distortions of capital eventually caused a depression in the teleconomy and wiped out hundreds of billions of dollars in savings.

    You see the after-effects of too much liquidity in capital markets today. The subprime mess is at least partially a result of too much money in the world. Too much credit lead to too many houses being built, and now you have a calamitous event occurring in the housing market, which is nowhere near finished.

    Many people believe Greenspan to be a great central banker. But many others do not. Jim Rogers has described him as "the most incompetent central banker of all time." I think that is harsh as I believe not all the problems in the world today are the result of his problems. But he certainly exacerbated them. And as we head into a recession and as housing prices continue to fall and financial companies blow up, he bares some responsibility.
     
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  9. Delbert
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    Delbert Rookie

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    very well said....:iagree:
     
  10. onedomino
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    onedomino SCE to AUX

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    You quote this unbelievably biased pal of George Soros as a credible source on Alan Greenspan? Not only is his appraisal harsh, it is flat out wrong and may be politically motivated. Please, at least characterize you citations, most people have no idea who Rogers is, or that he is deeply connected to Soros.
     

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