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Alan Greenspan and Neil Cavuto Neil Cavuto (of Fox news) to Alan Greenspan.
“Did you keep interest rates too low for too long, creating a bubble?”
Mr Greenspan to Mr Cavuto.
“Collapse of communism in Eastern Europe… [blah, blah, blah]… the Third World… [blah, blah, blah]… the rise of investment in China…”
Draw your own conclusions.
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Yes, I heard the same interview. It was a “yes” or “no”, or even a “maybe”, question but he simply avoided answering it altogether.
I thought I heard a “no” at the start, but I would not swear to it.
For those who say that I am unfair to Mr Greenspan “he attacks the wild spending of Congress, and he warns of the ever growing weight of the insane entitlement programs”.
As I have said on another thread – yes, and I am sure he is kind to children and animals as well.
If Mr Greenspan had been a Senator or a Congressman I would have compared his words to his voting record. Without a voting record (or a veto record if someone has been a State Governor or a President) it is not possible to judge how they will act – as talk is cheap.
Mr Greenspan was Chairman of the Federal Reserve (for about 20 years) so it is monetary policy that he must be judged on (not his attacks on fiscal policy).
Mr Greenspan did not go back on any of his bailouts – his expansion of credit-money.
He also supported the rate cut today.
As for the current problem. Mr Greenspan correctly said that a lot of the debt paper that is in trouble is linked to the real estate market – his solution was that housing defaults should be prevented, if the powers-that-be can prevent them.
Mr Greenspan clearly did NOT mean private agreements between lenders and those who borrowed money to buy houses. He meant another bail out.
This is the mentality of the man – bail out, bail out, bail out. For everything and everyone (at least everyone who is politically important). And this is why he is no more the “Goldwater Republican” he claims to be, than he is a cat.
“But you are attacking an old man”.
Was Mr Greenspan an old man after 1987?
Remember the great credit money expansion (in response to a big fall on the stock market) – a credit money expansion that set up a boom-bust that was a big reason that George Herbert Walker Bush lost in 1992.
Of course Herbert thinks the reason he lost was that Mr Greenspan did not cut interest rates enough in 1992 – he is does understand that the reason for the slump was the previous credit money boom.
Of course Herbert was a poor President anyway (tax increases, Americans with Disablities Act, and so on). But it was the slump that finished him – and it was the Greenspan boomlet that caused the slump.
And then we have Long Term Capital Management and all the other bailouts.
And the credit money expansion that was the real cause of the .com bubble. And the present bubble.
And all the rest.
Old now sure – old twenty years ago, NO.
Ayn Rand was right about Mr Greenspan (in that meeting long ago when it dawned on the lady what sort of man he had become and what sort of things he would do if he ever got to a position of power).
He does not need rational argument (he understands what he does is wrong – he does it anyway to bailout the politically important) he needed the plate flung in his face (which is what the lady did).
Pity is that the Ayn Rand did not shove the plate down Mr Greenspan’s throat.
That cannot possibly be Alan Greenspan.
Alan Greenspan was abducted by aliens just a hair over twenty years ago, and has never been seen or heard of, since.
That thing is not him.
The question implies a basic principle upon which they had no dispute: That the FED needed to manipulate interest rates, and keep them low for some time.
The question was only about “too low” and “for too long” – about the specific rate, and time. This is a dumb question, as it has verifiable answer, and Greenspan gave as good an answer as there is.
There are no criteria for determining what is “too low” or what is “too long”. It’s all just hunches and guesses. Greenspan said as much in the Times interview Johnathan quoted above.
It’s the same as trading in the stock market. There are no “methods” and no “science” in it, it’s all guesses and hunches, and luck.
We shouldn’t forget that the FED isnt the only culprit in this mess… other low rate nations, significantly Japan and Switzerland, have been lending hand over fist and continue to do so at comedy rates.
There is method and science. It’s just not enough to know and predict all.
“There is method and science.”
Sure. When you win – it’s “method and science”.
When you lose it’s bad luck.
Last month I just held on to some stocks a bit “too long”. I hope that my science prevails, and I’m gonna recover my (minuscule) losses soon.
Well I wrote a long comment on this last night which still had not turned up – my own fault, clearly I am rude and the noble bot has punished me.
Anyway.
Jacob – you have just presented a good argument against the Fed setting interest rates (indeed against the Fed existing at all). Although you may not agree that this is not what you have done.
Billy Beck.
When I hear Mr Greenspan calling cutting off (or even reducing) the supply of funny money subsidies “punishing” people (something he is against for “the good of the economy”), I wish the aliens had abducted him – and stuck various things up his …..
Jonathan:
The Swiss money supply stats I have seen do not look like a credit-money boom – do you have access to better stats?
If so send them to me.
Of course the Swiss central bank should not exist (it did not in the 19th century – even after the Constitution of 1874, of course I am so reactionary I am not really happy with even the Constitution of 1848). But “low interest rates” are not the only thing.
Either there is a credit-money bubble of Swiss Francs or there is not.
Some measures of credit money I have seen even say that some forms of credit money are in decline in Switzerland.
“What is the point of sending you stats Paul – in your ideal world each Canton, that wanted to, would still be minting gold and silver coins (with exchange rates NOT fixed of course) and banking would be a matter of primitive money lending”.
If anyone is thinking that, you have a point.
It wasn’t my argument. I was quoting Greenspan, though I agree. (He, as Fed chief, set interest rates anyway…).
About central banking in general: central banking isn’t what it used to be a couple of decades ago. Central bankers have lost their great autonomy to globalization, that imposes constraints on them. This is good. Instead of one or two dominant global currencies like gold, the dollar or the Pound in the past, we now have several more – the Euro, the yen, the renminbi.
I am sympathetic to the idea that we could do without central banks, though it seems rather theoretic and remote. And an economy without central banking surely has problems too. I’m really not sure which is better, and anyway, central banks aren’t going to fade away anytime soon.
Such things as Euro Dollars (and other such) were, as you know Jacob, very important even back in the 1950s.
A ederal Reserve Chairman does not have to keep on pumping out endless extra money if he does not want to.
Globalization would not stop the present Fed Chairman acting as Paul Volker did in 1981.
“But the economy would fall off a cliff if the financial system had to go cold turkey on the endless bail out tide of credit-money”.
Yes it would – but pumping more money will not prevent recession in the end. It may may put recession off – but it will also make it worse when it eventually comes.
The bust could have been avoided in Mr Alan Greenspan had not supported vast increases in credit-money for year after year (if you want to prevent the bust you must prevent the credit-money boom).
It was not “globalization” it was the judgements of a human being.
Judgements that us Austrian School sons-of-bitches have denounced for years.
His book is interesting enough, especially his evaluations on the Presidents that he worked with.