Jump to content
House Price Crash Forum

Alan Greenspan Interviewed By Evan Davis


Recommended Posts

Hubris. Narcissism. Ideological bias. It's worth recalling that as late as 2005 the central bank mafia were still congratulating themselves over The Great Moderation, the goldilocks combination of above-trend growth and negligible inflation they believed had been brought about by open markets, financial deregulation and globalisation.

If only they'd allowed inflation to be consistently zero or slightly negative throughout that period we would have fared much better.

Link to comment
Share on other sites

The odd thing about Greenspan is that he more or less subscribed to the view that everyone should act in their own self interest and was then surprised when the bankers did exactly this and brought down the banking system.

He seems to have assumed that the interests of the individuals working in the system would align perfectly with those of the system itself- clearly he had never come across the acronym; IBGYBG*

*(finance) I'll be gone, you'll be gone. (I'll have gotten my commission; you'll have sold out to the next guy; neither of us will be held accountable).

http://en.wiktionary.org/wiki/IBG_YBG

So this acolyte of Ayn Rand made the interesting error of assuming that bankers et al. would place the long term interests of the institutions that employed them above their own short term personal gain- a most 'unrandian' assumption to make.

I haven't (can't) see this Daily Show interview with AG, but Cullen Roche thinks he's reversed his tenets:

Alan Greenspan was on The Daily Show the other night and I hardly recognize him. Among the things he says:
  • Market participants are not rational.
  • Models based on rational expectations led us astray.
  • Banking regulation can substantially help smooth the business cycle.
  • He would DOUBLE required bank capital from 11% to 22%!
  • The Investment Banking model as private partnerships was superior to the public company model.

http://pragcap.com/who-is-this-man

Link to comment
Share on other sites

Greenie wanted housing bubble dissent kept secret.

http://www.huffingtonpost.com/2010/05/03/greenspan-wanted-housing_n_560965.html

As top Federal Reserve officials debated whether there was a housing bubble and what to do about it, then-Chairman Alan Greenspan argued that dissent should be kept secret so that the Fed wouldn't lose control of the debate to people less well-informed than themselves. "We run the risk, by laying out the pros and cons of a particular argument, of inducing people to join in on the debate, and in this regard it is possible to lose control of a process that only we fully understand," Greenspan said, according to the transcripts of a March 2004 meeting.

At the same meeting, a Federal Reserve bank president from Atlanta, Jack Guynn, warned that "a number of folks are expressing growing concern about potential overbuilding and worrisome speculation in the real estate markets, especially in Florida. Entire condo projects and upscale residential lots are being pre-sold before any construction, with buyers freely admitting that they have no intention of occupying the units or building on the land but rather are counting on 'flipping' the properties--selling them quickly at higher prices."

Had Guynn's warning been heeded and the housing market cooled, the financial collapse of 2008 could have been avoided. But his comment was kept secret until Friday, when the central bank released the transcripts of Federal Open Market Committee meetings for 2004 and CalculatedRisk spotted it. The transcripts for 2005 to the present are still secret.

"The substantial run-up in house prices, which we have followed in Florida and also see in the populous Northeast and West Coast of the United States, may be at least partially attributable to unusually low mortgage rates influenced by our very accommodative policy," Guynn warned.

But when the Fed released contemporaneous minutes of the meeting, the bank downplayed Guynn's concerns.

"Reports from some contacts suggested that speculative forces might be boosting housing demand in some parts of the country, with concomitant effects on prices, suggesting the possibility that house prices might be moving into the high end of the range that could be consistent with fundamentals," reads the minutes, which were released to the public several weeks after the meeting.

Note the qualifiers "might be," "suggesting the possibility," "might be," "could be." In the real world that Guynn described there is nothing whatsoever "consistent with fundamentals" that could explain "buyers freely admitting that they have no intention of occupying the units or building on the land but rather are counting on 'flipping' the properties."

Link to comment
Share on other sites

Greenie wanted housing bubble dissent kept secret.

http://www.huffingtonpost.com/2010/05/03/greenspan-wanted-housing_n_560965.html

(...) "We run the risk, by laying out the pros and cons of a particular argument, of inducing people to join in on the debate, and in this regard it is possible to lose control of a process that only we fully understand," Greenspan said (...)

Yep, he got high on hubris.

Another puzzle:

In 1977, Greenspan obtained a PhD degree in economics from New York University. His dissertation is not available from the university[15] since it was removed at Greenspan's request in 1987, when he became Chairman of the Federal Reserve Board. However, in April 2008, Barron's obtained a copy, and notes that it includes "a discussion of soaring housing prices and their effect on consumer spending; it even anticipates a bursting housing bubble".

http://en.wikipedia.org/wiki/Alan_Greenspan#Early_life_and_education

Link to comment
Share on other sites

Why did he ignore it? Why?! FFS, why?!

I don't get it.

From what I remember in the book he seemed to suggest he ignored it as he was being told by others and the US political leaders I think Clinton etc... that "this time it was different". The economy was a "modern" one which meant the old rules no longer applied.

For me it read I sold out for political expedience!

Edited by interestrateripoff
Link to comment
Share on other sites

Thanks, hehe - US satire so much better than UK, worth watching from the start.

Greenspan does admit all those points - but the video doesn't have the question, "So why the **** did you do it, dickweed?"

Surprisingly Evan Davis did ask that question, basically. Greenspan answer was kind of "I was just a powerless central banker!". It's in the R4 Today Programme linked to the OP.

Link to comment
Share on other sites

Surprisingly Evan Davis did ask that question, basically. Greenspan answer was kind of "I was just a powerless central banker!". It's in the R4 Today Programme linked to the OP.

I did catch the Davies interview while driving. No answer - "oh well, at least I asked the great man in a mumbling BBC way". No reference to private debt, no reference to leverage.

So I prefer the Daily Show satire: private and public debt are not related, but at least the hypocrisy is made clear.

Link to comment
Share on other sites

Join the conversation

You can post now and register later. If you have an account, sign in now to post with your account.

Guest
Reply to this topic...

×   Pasted as rich text.   Paste as plain text instead

  Only 75 emoji are allowed.

×   Your link has been automatically embedded.   Display as a link instead

×   Your previous content has been restored.   Clear editor

×   You cannot paste images directly. Upload or insert images from URL.

Loading...
 Share

  • Recently Browsing   0 members

    • No registered users viewing this page.




×
×
  • Create New...

Important Information

We have placed cookies on your device to help make this website better. You can adjust your cookie settings, otherwise we'll assume you're okay to continue.