That essentially was Easy Al’s testimony:

Former Federal Reserve Chairman Alan Greenspan said a “once-in-a-century credit tsunami” has engulfed financial markets and conceded that his free-market ideology shunning regulation was flawed.

"Yes, I found a flaw,” Greenspan said in response to grilling from the House Committee on Oversight and Government Reform. "That is precisely the reason I was shocked because I’d been going for 40 years or more with very considerable evidence that it was working exceptionally well.”

Greenspan said he was “partially” wrong in opposing regulation of derivatives and acknowledged that financial institutions didn’t protect shareholders and investments as well as he expected.

"We cannot expect perfection in any area where forecasting is required,” he said. "We have to do our best but not expect infallibility or omniscience.”

Part of the problem was that the Fed’s ability to forecast the economy’s trajectory is an inexact science, he said.

"If we are right 60 percent of the time in forecasting, we are doing exceptionally well; that means we are wrong 40 percent of the time,” Greenspan said. "Forecasting never gets to the point where it is 100 percent accurate.”

Discuss amongst your selves — Greenspan: Bad FOMC Chair, or the Worst FOMC chair?


Source:
Greenspan Concedes to `Flaw’ in His Market Ideology
Scott Lanman and Steve Matthews
Bloomberg, Oct. 23  2008
http://www.bloomberg.com/apps/news?pid=20601087&refer=&sid=ah5qh9Up4rIg

Category: Federal Reserve, Regulation

Please use the comments to demonstrate your own ignorance, unfamiliarity with empirical data and lack of respect for scientific knowledge. Be sure to create straw men and argue against things I have neither said nor implied. If you could repeat previously discredited memes or steer the conversation into irrelevant, off topic discussions, it would be appreciated. Lastly, kindly forgo all civility in your discourse . . . you are, after all, anonymous.

153 Responses to “Greenspan: “I Suck””

  1. Jeff M. says:

    Well, if you ask that “free market” ideologue fraud Stephen Moore, he would say that Greenie is the best Fed Chairman we’ve ever had (not sure that says much, however)……

    What do I say? I would say the jury’s still out but if this market/economy truly falls apart like I think it could, I would say he’s the worst ever, by far.

  2. Pete says:

    But, but… I trusted them to do the right thing

  3. Pete says:

    But, but… I trusted them to do the right thing

  4. J Coin says:

    I’ve been operating under the assumption that Greenspan did what he did intentionally, knowing that things would unfold as they are now.

    Much of what he said in his testimony, interpreted precisely, was trivial and tautological. It’s just the spin people (the press) puts on it that makes it sound so atrocious.

    Until I’m convinced otherwise, operating with the values that the existence of the Fed is a bad thing, I’m of the opinion that ne’s not a bad FOMC chairman, nor the worst, but the best!

  5. the man from Nantucket says:

    there is a difference between wrong and rotten. i think Al’s policy decisions turned out to be very wrong, but i don’t think he’s rotten (by rotten i mean: knowingly pursued path that would lead to current financial crisis just because he wanted to for fun or make some $ off it).

  6. VennData says:

    Ayn Rand’s preeminent real-world adherent recants. Objectivism, soiled, enters the dust bin of history.

    You need people, working together, who know the rules, and that those rules are fair and enforced, which is the opposite of Objectivism and is necessary for Capitalism.

  7. And I used to think he was the best… surely he can’t be the worst, think about the 70s, they didn’t get anything right,not even inflation

    so chalk him up as a very bad Fed Chair

  8. tyaresun says:

    Finally at age 82 finally loses innocence. About 60 years too late.

  9. JD says:

    “Greenspan: I Suck”. Ha! That is your best blog post title ever, Barry. Sums it up in 3 words.

    Greenspan managed to preside over two of the largest bubbles in the history of mankind. That’s hard to do. Would the bubbles still have happened without the easy money unleashed by Al? Yeah probably, but not nearly as bad. Al made it special for the whole world.

  10. J Coin, is on to something, Ol’ Easy Al did us a tremendous favor–he operated the FedRes in such a way that it became obvious, to even the most blinkered, that ‘Central Banking’ has severe limits, at best, is a Wholesale Fraud, in *Reality, that will leave You ‘Holding the Bag’.

    We owe Greenspan a debt of Gratitude. The FedRes should pack up their Notes and go Home. As well, if they’d, kindly, leave a forwarding address, I’m sure they have some Creditors that would like to speak them..

  11. I-Man says:

    I think he borrowed a shitload of yen and invested it in the US stock market.

  12. Craig says:

    I still don’t understand why, over the past several years, all these imbiciles in the media proclaimed Greenspan to be this genius, because he spoke in puns, “sounded” intelligent, always spoke evasively, and all he was and still is, is a geriatric babbler who reads a lot of books.

    He was wrong, all along. And now, everyone is blaming this mess on him.

    Where were these idiots 10 years ago when they were blowing smoke up his geriatric arse????

  13. Estragon says:

    Surely Benjamin Strong deserves at least honourable mention. He arguably established the notion of the fed as a moderator of the business cycle and the use of inflation as a means of promoting stability.

  14. Jay Weinstein says:

    I am a committed ageist, I think that no one [even Buffett his own self] should be running a big company past the age of 70. The judgment just goes awry–and in this case, Easy Al believed his own clippings. How’s that Maestro book selling?

    So having Greenspan run the Fed into his 80′s was just suicidal. If he had quit in 1998, he would have legitimately done a good job.

  15. attilahooper says:

    Creditz – I has them !

  16. Anders Aronsson says:

    Let’s not try to blame this a long dead philosopher(Any Rand). However wrong she was, it was congress who pressured Greenspan to inflate bubbles and the media cheered him on.

    Greenspan is just a political opportunist. He probably knew the bubble would burst eventually.

  17. Jeremy says:

    Current testimony aside, why do so many MSM outlets continue to quote him ?

    On a separate note…since electronic voting has proven successful for such trivial things as American Idol, why can’t we employ the same ‘platform’ instead of having elected officials who seem to have compromised motives at every turn ? I wish I could find the email I was sent a month ago but suffice to say the financial services industry spent oodles of $$ lobbying for the loose regulations that allowed them to hang themselves.

  18. DL says:

    On Amazon.com, there are lots of people selling copies of Bob Woodward’s book “Maestro: Greenspan’s Fed and the American Boom” available for just one penny (+ $3.99 shipping and handling).

    If anyone’s interested.

  19. loan shark says:

    If the potential exists for mixing politics with fractional reserve, fiat money, central banking, Mr Greenspan, it ain’t a ‘free’ market.

  20. Mattie says:

    If Greenspan was just a political opportunist, and he probably knew the bubble would burst eventually. Do you think he wanted it to happen after he was dead… or before.

    Me thinks that Greenspan, Bush, Cheney, Pelosi, and a few others Wall Street execs, should be put into glass boxes in the Washington Mall so we can see what happens to people in a democracy that’s gone wild… and became totally irresponsible to the voters.

  21. kurt milne says:

    Mr. Greenspan said there should be more regulation of credit default swaps. More? Going from ZERO regulation to ANY regulation is an infinite increase…

  22. ConcernedCitizen says:

    Oh and next comes the discredit of the fiat money system. I know when a gift has been presented to me – I’m buying gold and silver all the way down!

  23. My Econ Class is realllly really interesting this year….

    I am rethinking the topic of my paper. Perhaps I should call it “Epic Fail: The policies of Alan Greenspan”

    I’m serious.

  24. Madame X says:

    I like your headline much better than mine!

  25. AGG says:

    Dear Mr. Greenspan,
    A Tsunami is a natural event. What we have here was caused by human malfeasance. No, you did not have the best of intentions. No, you did not have any intentions except to make sure the derivative pyramid that your chronies ran was well funded. Since you show no repentance, we can assume you accept no responsibility and willingness to make restitution. Therefore, we the people, have one question to ask you? What is your net worth? For every percentile that it grew during the bubble you facilitated, you will have to donate that amount in US dollars to homeless shelters. In addition, your social security monthly income will be sent to a national 401K rescue fund. Have a nice day.

  26. Joe McCann says:

    Worse. Leave interest rates at 1% for a year. Uhh, yeah, that’s pretty much worst decision EVER in my book.

  27. Bob A says:

    Well he does support the argument that it’s dangerous to allow tired old buffoons to occupy important government positions.

    Remember that when you vote

  28. RD says:

    It took a lot of guts for Greenspan to admit he was wrong. I admire him for that. How many CEOs of our current financial institutions have done the same?

  29. Empire says:

    Jeremy:

    While the corruption of elected officials is certainly a problem, direct democracy would be much, much worse. Here in California it is too easy to get initiatives on the ballot. There are two results. First, spending increases get approved but the tax increases to pay for them never do. Second, the special interest with the highest advertising budget almost always wins.

    Do you really think the people who are stupid enough to elect our officials will suddenly become smart enough to vote for the best policies?

  30. ConcernedCitizen says:

    Another thing the Masters of the Universe need to get rid of is the computer program trading. Since when does millions of computers in sync constitute a free market? I believe its suppose to be about the combined combination of misconstrude bets and the ones that hold true that make a market whole and not the ones that just push a market further in one direction!

  31. Vermont Trader says:

    i’m still trying to figure out where the puck is going to be…

  32. super-anon says:

    If Alan Greenspan really believed in free markets we wouldn’t have gotten the Greenspan Put, the LTCM bailout, and all the mess that came in its wake.

    Remember that for years people have been warning that this notion of a put from the Federal Reserve would lead to just the kind of mess we’re seeing now.

    The Fed and the government cannot protect market participants from losses and not expect them to take insane risks for the possibility of insane rewards without the possibility of insane losses. This is merely rational behavior on the part of the market (even if it is socially irresponsible).

  33. H Salmon says:

    I remember a few years ago when the “reality based community” was roundly criticized for pointing out things that were indisputably true. All was well in the world as long as we said it was.

    And in Corporate America I, like many others of you (bluestatedon I believe has written abt this), had to sit through “leaders” who told us that the merit of ideas did not matter. What mattered was how we “positioned” the ideas that the highest executive already wanted to execute. And anyone swimming against the stream with actual ideas was a threat.

    Now the light of day is shining on everything and the frauds are being revealed one by one. Welcome to the club Alan, you can sit next to W.

    Unfortunately life seemed better when we are all playing pretend.

  34. scorpio says:

    the Worst Person In The World

  35. Rod Roth says:

    The question is: Why was he the last to know?

  36. Peter T says:

    Greenspan was certainly one of the worse chairmen of the Fed who has weakened the US economy. Stock bubble and housing bubble under his watch, reduced saving in the US since about the time he started, and, last, but not least, Ghibberish as the preferred Fed speak. Why did he replace Volcker in 1987, and why the government let him continue after 1998?

  37. ConcernedCitizen says:

    Ah! Wagners on the Opera channel…almost makes me want to become a Fascist… :-)

  38. Jay Weinstein says:

    If Alan Greenspan really believed in free markets we wouldn’t have gotten the Greenspan Put, the LTCM bailout, and all the mess that came in its wake.

    Remember that for years people have been warning that this notion of a put from the Federal Reserve would lead to just the kind of mess we’re seeing now.

    Posted by: super-anon | Oct 23, 2008 3:32:12 PM

    S-A makes an important point here– Greenspan’s existence at the Fed directly contradicts free market philosophy now doesn’t it? I think Ron Paul is kooky, but his notion of ending the Fed was the best idea of the whole campaign.

  39. Chief Tomahawk says:

    Look! Easy Al rides a Segway!

    http://www.viralvideochart.com/youtube/chimpanzee_rides_segway?id=5pFv8CAniYQ

    Hey, who gave him the Presidential Medal of Freedom???

  40. wally says:

    Worst chair? That remains to be seen; not all entrants have yet been judged.

  41. AGG says:

    Dear Mr. Greenspan,
    What is the difference between income and capital gains?
    Wrong answer, pal. Capital gains income is the take home pay of tax cheats. Income is the wages of the working stiffs targeted by people like you (remember your 1.3% 1983 FICA innovation?) to support the fat cats. To be more precise, sir, capital gains is about 90% discretionary as opposed to about 3 to 5% discretionary for working stiff income. Tell me, butthead, at what point is shame left behind on the road to riches?
    Finally, please give us a list of your telephone contacts for the last 20 years. We have a new FICA tax coming up and we need “volunteers” to pay 10% of their “discretionary” capital gains. No, my mother has nothing to do with this. No, it is you that resembles that remark, Mr. Greenspan.

  42. VennData says:

    Anders, The Fed is independent from Congress, for now.

  43. AndrewBW says:

    I think I have to go with Arthur Burns as the worst.

  44. jdamon says:

    I have been saying (ever since the .com bubble burst) that Greenspan was the single most destructive human being on the planet. He has cost this nation (and maybe the world) more lives than even Hitler. How many people who lost everything in the .com crash and now in the credit crises just gave up wanting to live? more than likely millions up millions….

    He is evil incarnate or just the dumbest human being to ever have lived.

  45. LMonkey says:

    No wonder his wife thinks Palin spends too much on clothes

  46. JustinTheSkeptic says:

    Please, jdamon, give it some latitude…it’s a BIG YOB, man! There were buttons pushed upon more buttons. What happens is that you get the Bill Grosses, etc. tacitly breathing down your back…etc. etc….

  47. censeo says:

    I have commented here before: Ayn Rand and Alan Greenspan were twins. (Really! Find a pic of Ayny, morph the hair off: same scowl, same beady eyes, same demented brow.)i Look at him! Allyn. He got Randian Napoleonitis the first time he looked in a mirror. Yeah. I read Rand. When I was seventeen. I also read Superman, and Spiderman. Then I grew up.
    Give me Paul Volcker: Has Brain; uses it. No ego; what’s good for the nation–long term–is the cure: painful or not. Like seeing him talking to Obama. Give me a team with Volcker, Roubini, Stiglitz, Peterson. And please! Start preparing the obits for the Chitown monatarist fools: Friedman & co. Nations exercise their long term influence with fiscal policy, NOT MONETARY DEVICES.
    Picture this: It’s March 4th, 1933. Roosevelt pronounces in his inaugural address that “The Federal Reserve will take care of everything. I’m going to Campobello to clip coupons.”

  48. Critical Dune says:

    “The application of the Commodity Exchange Act to off-exchange transactions between institutions seems wholly unnecessary–private market regulation appears to be achieving public policy objectives quite effectively and efficiently” – Alan Greenspan 1997.

    http://www.federalreserve.gov/BoardDocs/Speeches/1997/19970221.htm

    I’d like to feel sorry for a guy who, in the twilight of his life, has the sudden realization that his “friends” on Wall Street played him for a sucker, but I don’t. Rather, I have genuine compassion for the real human toll that deleveraging an orgy of Greenspan enabled excess will bring to regular folks.

    Encouraging leverage creation and risk management to be disintermediated away from regulated entities to a predictably rapacious, totally self-interested, and opaque cast of characters was the height of irresponsible public policy. Hopefully, we will learn something and keep incurious ideologues out of positions of responsibility going forward. A vote for the Obama/Volcker economic team on November 4 is a step in the right direction.

    Greenspan’s reputation is now right where it belongs…in the dumpster.

  49. The NDS says:

    “Look at him… he’s old, I mean.. look he’s old, he’s just old”

  50. Vic says:

    Duh. The Austrian school of economics has been warning about this credit bust FOR YEARS. Yet no one EVER questions whether the Fed should exist in the first place. Why?

    Because we’re a country of idiots run by morons.

  51. Jack says:

    From withholding valuable information in the ’87 crash to claims of irrational exuberance and “we don’t need no stickin’ regulations”, EZ Al was good a putting lipstick on a pig. Too early to tell as the pork has yet to be served.

  52. dead hobo says:

    Why did you punish yourself and listen to it? I heard a bit, but then decided to look for decent reruns of things blowing up on the other channels. Better use of valuable time.

  53. loan shark says:

    You got it, Vic!

  54. KJ Foehr says:

    Would “Helicopter Ben” have done anything differently than “Easy Al”?

    Probably not.

    Plus, we don’t know what political pressure he may have been under from W to keep the tap turned on full stream in ’03 and ’04 (W’s second term election year). And Al may have complied because he owed Daddy George, and consequently W, because they blamed Al for the 90-’91 recession that they believe cost GHWB the ’92 election.

    He should have retired in ’03, then he would still be known as The Maestro.

  55. montaigne says:

    *snort*

    Greenspan telling us he’s a free marketeer, is like a man telling me he loves Jesus right after he snorts a line of blow of a hooker.

  56. montaigne says:

    Argh … try and be funny and I do a typo.

    should read “…off a hooker.”

  57. pete says:

    “Ayn Rand’s preeminent real-world adherent recants. Objectivism, soiled, enters the dust bin of history.”

    I’m not sure if Ayn Rand has really been disproven. Lately I have felt like we are living in Atlas Shrugged near the crash with everyone screaming “somebody fix it”. The thing is those who have cheered her so much, and saw themselves as Hank Reardon or John Galt turned out to really be The Looters.

  58. JustinTheSkeptic says:

    KJFoehr, c’mon dud, you seem to forget to mention his years under “Slick Willy???????” Oh! that’s right selected memory…I forgot. POLITICS SUCK!

  59. Mike in NOLa says:

    At least he gave us another rally.

  60. i’m still trying to figure out where the puck is going to be…

    Posted by: Vermont Trader | Oct 23, 2008 3:30:35 PM

    VT,

    Imagine you’re/we’re the Goalie, look behind you, remember how you used to be able to see the Ice through the net? Can’t now, the goal has been so stuffed full of Pucks, that have whistled, silently to most, past us that the, formerly, empty net, looks like a black wall..

    past that, this: Picture this: It’s March 4th, 1933. Roosevelt pronounces in his inaugural address that “The Federal Reserve will take care of everything. I’m going to Campobello to clip coupons.”

    Posted by: censeo | Oct 23, 2008 4:15:22 PM

    unbelievably, speaks for itself.

    And, yes, there really is an Austrian School of Economics, if you’re interested in rebuilding what’s left of our Country, you’ll find its precepts helpful to that end..
    for intro, see: http://www.mises.org

  61. Donkei says:

    If humility is assumed to be inversely porportional to competence, and humility in fed chairmen (or anyone) is a virtue, then yes, Greenspan was the worst fed chair ever.

    But always remember: Even the notion that there could be a good fed chairman assumes something that I refuse to concede–that central banks should attempt to manipulate human behavior and market outcomes through money supply monopolies.

  62. Donkei says:

    correction:

    If humility is directly porportional to competence

  63. Mike in NOLa says:

    Had to run down to court and completely forgot what made the biggest impression: The risk models created by the Nobel laureates aren’t broken; they just received the wrong inputs.

    “It was the failure to properly price such risky assets that precipitated the crisis. In recent decades, a vast risk management and pricing system has evolved, combining the best insights of mathematicians and finance experts supported by major advances in computer and communications technology. A Nobel Prize was awarded for the discovery of the pricing model that underpins much of the advance in derivates markets. This modern risk management paradigm held sway for decades. The whole intellectual edifice, however, collapsed in the summer of last year because the data inputted into the risk management models generally covered only the past two decades, a period of euphoria. Had instead the models been fitted more appropriately to historic periods of stress, capital requirements would have been much higher and the financial world would be in far better shape today, in my judgment.”

    I could hear Taleb cursing from across the country.

  64. brasil says:

    Question…let’s assume..the rating agencies..actually did their job..so that AAA meant what everyone thought it meant..and lets say Fannie was run like Wells Fargo for example…and maybe if the various Wall St houses would have not slimed the whole world.. even with all that terrible deregulation and those low low interest rates for far far too long…this problem would have been $200 -$300 million world wide…houses would not have artificially inflated past all reason..and Alan Greenspan (an 82 year old man) would not have been before a bunch a disgusting far more guilty than he subhumans today answering questions…then lets go back..we have had years and years of excellent living standards..and growth around the world…so I wonder if he will get the blame for the credit card bust about sweep the nation too.. ..and crack me up ..Ayn Rand …instead of just bashing maybe someone could actually state what is so incorrect about her basic ideas in contrast to say Soviet Russia which her novel and ideas were in response to..hmmm anyone been to Russia before 1986..?

  65. leftback says:

    i’m still trying to figure out where the puck is going to be…

    Posted by: Vermont Trader | Oct 23, 2008 3:30:35 PM

    The black swan is holding the puck between its teeth….

    Seriously, if you are confused, we all must be. This massive $ rally resulting from the EM meltdown has ruined my trading for the last few weeks. I am playing for a strategy based on concerted efforts at reflation, but I am not fully convinced that they can pull it off.

  66. Winston Munn says:

    Good Fed Chairman is an oxymoron.

  67. Mike in NOLa says:

    leftback:

    We should have both just stayed in SRS :+)

  68. John Hargreaves says:

    ‘Yes, I found a flaw”. Brilliant – 5 words to sum up years of theory.

    And:

    “If we are right 60 percent of the time in forecasting, we are doing exceptionally well; that means we are wrong 40 percent of the time,” Greenspan said. “Forecasting never gets to the point where it is 100 percent accurate.”

    Sustitute ‘driving’, ‘sending a man to the moon’, ‘handing out change at the 7-11′, or a myriad other things, for the word ‘forecasting’ and see how silly it sounds.

  69. super-anon says:

    Anders, The Fed is independent from Congress, for now.

    Haha… tell that to Aurthur Burns. Or the congressmen telling Bernanke “don’t forget who you work for” on national TV.

    Last I checked the constitution gives the congress control over the money supply, not the Federal Reserve.

  70. door # 3 says:

    Greenspan: Bad FOMC Chair, or the Worst FOMC chair?

    worst

    as are the chimp & shooter

    the past 8 years also qualify for that moniker.

  71. Larry says:

    No ifs, ands, or buts, Greenspan was the worst Fed chair ever!! His job was to take away the punch bowl when all were partying. Instead, he added more punch and made himself Alan the biggest bubble blower of all time.

  72. Jay says:

    Echo echo echo…..

  73. harold says:

    By their fruits we have known them.

  74. Todd says:

    I think the worst part of Gspan’s legacy is that he altered the overall perception of what a Central Bank governor does.

    He changed it from serving the overall economy (healthy/steady GDP growth rate, relatively stable prices) to appeasing (and keep growing / inflating) the equity markets.

    Every action he took was towards the betterment of Wall St. over Main St. (sorry to use simplistic terms).

  75. Jojo says:

    @RD “It took a lot of guts for Greenspan to admit he was wrong. I admire him for that. How many CEOs of our current financial institutions have done the same?”

    Talk is cheap. Why doesn’t he take true responsibility and commit sepuku? A random person whose IRA has lost say 50% of its value could be chosen to do the final honors.

  76. Jojo says:

    @Jeremy – On a separate note…since electronic voting has proven successful for such trivial things as American Idol, why can’t we employ the same ‘platform’ instead of having elected officials who seem to have compromised motives at every turn ?”

    Because that would turn us into a democracy instead of a representative form of government. A change to the Constitution would be required.

    And anyway, that would bring up a whole ‘nuther set of problems. Just think of all the people who voted for a 2nd turn for GWB or are enamored over supposed hockey mom Sarah Palin. No, I don’t think a true democracy would be a good idea in today’s USA….

  77. Poopscooperforlife says:

    “Ya can’t be right fifty tree percent of da time without being wrong forty seven”

    Jimmie the Greek Snyder

  78. Bill says:

    Greenspan did what he was told by the Bush administration . So has Bernanke both are taking the rap . They deserve it though for not speaking up and resigning .

  79. chad says:

    ‘I Suck’
    And that is exactly why NOBODY should be changing the rates. In the end, who wouldn’t suck?
    Whoever it is would be a gajigatrillionaire. Don’t know of any of those…

  80. VJ says:

    Joe,

    Worse. Leave interest rates at 1% for a year. Uhh, yeah, that’s pretty much worst decision EVER in my book.

    The only problem is, reality got in the way, as every time they raised the Fed Funds rate above 2%, the national economy crashed. I mean, look where we are AGAIN.
    .

  81. SR says:

    Since he is making the rounds professing Mea Culpa (or is it “nolo contendere”?), perhaps he can expand his talents for defined understatement across the pond.

    http://www.bbc.co.uk/blogs/thereporters/robertpeston/2008/10/now_there_are_runs_on_countrie/html

    re: “Every action he took was towards the betterment of Wall St. over Main St. (sorry to use simplistic terms).”

    “For every problem, there is a solution that is simple, neat, and wrong.”
    -H L Mencken

  82. JC says:

    Unlike King George he semi admits making a mistake. In spite of this humility he’ll still have to share fatherhood of the Great Depression II with the disinterested Chimpy.

  83. yernamehear says:

    Worst: Arthur Burns

    Greeny is for sure a political opportunist, and went from very good to very bad on the Fed chair scale. Remember that he did a good job in ’87, ’89, ’90, but it was probably downhill from there.

    When he said something like “I didn’t expect the greed” a few weeks ago, well, any respect I had was severely reduced.

    I keep thinking back to Milton Friedman’s saying that we could replace the Fed with a computer; maybe not a bad idea at this point.

  84. Crank Yankee says:

    Alan Greenspan should be made to sit in the corner and watch this clip continuously until the dollar reaches parity with it’s value in 1913.

    http://www.youtube.com/watch?v=UM5yepZ21pI

  85. Eric Sebille says:

    anyone have a link to the fed working paper 666 rick santeli was speaking of.

    TIA

  86. Megan McCardle would file this post under the “Evil man theory of failure”.

    I was struck by Greenspan’s use of the word tsunami. Earlier today, I mentioned to someone that the current wave of deflation seems analogous to the way the ocean sucks itself in before a tsunami hits, i.e., this looks like the deflationary sucking-in before the tsunami of inflation hits.

  87. Bruce in Tennessee says:

    Well even with the money now injected into the markets, ALL mortgage rates are still higher than they were 6 months ago.

    Fixed and ARM’s….

    And qualifying is much more difficult…

    http://www.bloomberg.com/markets/rates/keyrates.html

    Mortgage crisis may still have a ways to run..

  88. Ron says:

    What do you when the debt deflation crisis hits? Reduce debt, increase liquidity. What would the Greenspan Fed have you do? Increase debt and spend. Nauseating.

    Greenspan’s book shows he is capable of thinking and communicating clearly. Why not earlier?

  89. Comrade Darkness says:

    >The black swan is holding the puck between its teeth….

    Teeth? That’s one heck of a swan. Course, we knew that..

    1987 to 2006 is too long to hold down this kind of a job. You start to believe you know what you’re doing and overreach. It’s a job only for someone who is certain to the core of their heart that the relevant unknowns outnumber the knowns by 100 to 1.

  90. BobG says:

    A couple years ago, Harry Reid said Greenspan was a first class hack, and he was right.

  91. anon says:

    sigh….It’s not my fault that there was a once-in-100-year tsunamis…

    subprime;
    LTCM;
    dot.com bubble,
    Asia 1997,
    Russia 1998,

    no, as a society, we forgot the lessens of the 1920′s/Great Depression and every 19th century boom/bust.

    someone strangle the next person that uses that meme!

  92. Gordon Gecko says:

    Once upon a time, in a village, a man appeared and announced to the villagers that he would buy monkeys for $10 each.

    The villagers, seeing that there were many monkeys around, went out to the forest and started catching them. The man bought thousands at $10 and, as supply started to diminish, the villagers stopped their effort.

    He further announced that he would now buy at $20 for a monkey.

    This renewed the efforts of the villagers and they started catching monkeys again. Soon the supply diminished even further and people started going back to their farms. The offer increased to $25 each, and the supply of monkeys became so small that it was an effort to even find a monkey, let alone catch it!

    The man now announced that he would buy monkeys at $50! However, since he had to go to the city on some business, his assistant would now buy on behalf of him.

    In the absence of the man, the assistant told the villagers. ‘Look at all these monkeys in the big cage that the man has collected.

    I will sell them to you at $35, and when the man returns from the city, you can sell them to him for $50 each.’ The villagers rounded up all their savings and bought all the monkeys.

    They never saw the man nor his assistant again, only monkeys everywhere!

    Now you have a better understanding of how Wall Street works.

  93. Juhuti says:

    @ Eric Sebille

    He’s probably referring to this: http://www.minneapolisfed.org/research/WP/WP666.pdf

  94. Jeff M. says:

    @leftback: I’m with you. GDX has completely ruined what would otherwise had been some nice gains lately (thanks to QID, SRS and SKF).

    If they can’t pull off reflation, where do we go from here? Are we all cooked if that’s the case?

  95. leftback says:

    @ Jeff M: If the $ rally doesn’t turn around soon, we are going to see this economy deflate all the way back to the Stone Age. I can only assume that they are printing like maniacs, no matter what Ben Bernanke might say about “sterilization”.

    I have been in and out of GDX and a few oil stocks, it’s been frustrating. On the other hand, shorting junk bonds is going well, and if there is reflation it will only get better. I guess we weren’t trading in the 1930s so we haven’t had much practice at this….

  96. Jeff M. says:

    leftback: I fear you may be right. Actually finally got out of some of my GDX position and took a loss on it. Needed to put the capital use on other trades (namely RXD). That GDX position and other energy holdings (ACI, XTO) have been painful lately.

    Trying to stay in the game but it’s getting harder by the day. Cold hard cash and a good night’s sleep are starting to look rather appealing right now. I fear ’09 is going to be the worst year I’ve ever lived through. I haven’t thrown in the towel yet, but I’m wondering if it might be better for my sanity to stay on the sidelines or at least mostly in cash. I’m sure there will be plenty of time to get back in and make some money over the next 12-18 months.

  97. VJ says:

    A LACK OF IMAGINATION, OR… ?

    * Candy Rice on 9/11: “No one could have imagined them taking a plane, slamming it into the Pentagon … into the World Trade Center, using planes as a missile.

    * Chimpy Bush on Hurricane Katrina: “The destruction left by Katrina reaches beyond anything we could have imagined.

    * Greenie on the credit tsunami: “The crisis, however, has turned out to be much broader than anything I could have imagined.
    .

  98. Mike in NOLa says:

    Re: The Stupidity of the Dollar rally

    Quote lifted from FT Alphaville:

    “Jim Reid, Deutsche Bank:

    It’s a depressing world when the only safe haven at the moment is a country that has recently nationalised its two largest mortgage companies, bailed out the world’s largest insurance company, is spending $700bn buying toxic assets, is injecting $250m[sic] into its largest banks after high profile failures and is about to go on a fiscal expansion the likes it has never before seen in its history.”

    The rally is attributed to the fact that almost all of the redemptions have to be paid in dollars, so that is causing the buying. Hussman said a few weeks ago that an improvement in credit situation should, counterintuitively, lead to a drop in the dollar.

    I expect that when redemptions slow down and people think about it, they will realize that the dollar ain’t the place to be.

    I’m sitting tight on my Euro funds. The Europeans may be loose, but they are tight as a drum compared to us.

  99. evening shade says:

    @Gordon,
    That’s funny. I have another monkey story.

    Once upon a time, in a village, a man raises monkeys to perform monkey-shows to the villagers.

    The man tells the monkeys that, for their performance, he will give them three bananas in the morning and four bananas in the afternoon. The monkey are not happy about the arrangement, they refuse to perform.

    The man then said, okay I will give you four bananas in the morning and three bananas in the afternoon. The monkey are very happy about what they hear.

    Now you have a better understanding of how Washington politics work.

  100. VennData says:

    So it’s either Ayn Rand of Soviet Communism, is that it Brasil?

    You’ve engaged in an argumentative technique referred to as a ‘Straw man’ You set up and impossible situation and claim that I claim it.

    There is a middle road, FDIC insurance is one example of many. The key point is Greenspan, Rand’s most famed adherent, has stated in Congressional testimony that his ideology (much of it Rand’s Objectivism) is flawed.

    We had the line drawn fairly well until they pushed it too far. Let’s fix it.