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The Former Chairman Of The Federal Reserve Board Is Speaking Out - And, More Worryingly, He's Spooking The Market

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http://business.timesonline.co.uk/tol/busi...icle4450162.ece

REMEMBER when Alan Greenspan was hard to understand? The gnomic — and gnome-like — former Federal Reserve chairman used to be a master of obscurity. Here are some words from his mid-1990s glory years — If you haven’t had breakfast yet, I suggest you skim read this.

“And I think where the confusion arises is the fact that you cannot view monetary policy as a sort of simple issue, if the most probable outcome is coming out of this soft patch into moderate growth with low inflation, which I think is the most probable outcome, that is not the same statement as saying that you therefore, in the process of implementing monetary policy or formulating it, I should say, completely disregard what the upsides and downsides of a potential outcome may be.”

Horrific. Well he’s obscure no more. Now that Alan is a paid pundit and not Master of the Financial Universe, he’s saying what he means. Whether he should or not is another matter.

Last week Greenspan was on CNBC and was clear in his views that we were heading in the wrong direction. The housing slump was “nowhere near the bottom”, the economy was “right on the brink” of a recession and the mortgage giants Fannie Mae and Freddie Mac were “a major accident waiting to happen”.

To be fair Greenspan was still showing signs of his talent for smudging the outlines of his arguments. “I think the data at this stage in the United States are not . . . suggesting recession,” Greenspan said. But he added: “We’re right on the brink and I would be more surprised if we didn’t [have a recession] than if we did, given the financial state.”

Greenspan said companies were controlling inventories effectively and that “at this stage, I think they are the major reason why in the very short term we’re fending off inflationary pressures”. But he noted that with jobless claims rising and growth overseas slowing, it would be hard for the US to avoid recession.

Who will history blame for this mess? My money is on Greenspan getting his own chapter. The housing bubble and the overheated credit markets were financed by Greenspan’s easy monetary policy and unwillingness to regulate.This is not the first time that Greenspan has opined on a mess that he created, or that he’s told us, too late, something we already know.

Having done so much to encourage the millennial dotcom/tech fiasco he tried, way too late, to slow that bubble’s impending pop by dismissing it as “irrational exuberance”. When the markets imploded, he sucked up all the hot air and blew it into the housing market with rock bottom interest rates and a pat on the back for the free market excesses that led to the sub-prime disaster.

So Greenspan is starting to talk plain English!!!!!

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This is Peter Schiffs latest economic commentary and it is critical of Greenspan. However I think it is hypocritical of people

like Schiff who believe in the free market liassez faire capitalism to be critical because Greenspan has only followed and implemented the very same policies schiff himself extols.

The Maestro Won’t Face the Music

In an interview yesterday on CNBC, former Fed Chairman Alan Greenspan cast his eyes on the charred landscape of the national real estate market and offered high-minded criticisms of the obvious excesses and irrationalities that brought on the devastation. Greenspan’s attitude was akin to a retired drug dealer lamenting the urban blight caused by rampant addiction. He noted that housing prices were still too high, that too many homeowners were upside down on their mortgages, and that Fannie Mae and Freddie Mac were accidents waiting to happen. Methinks the serial bubble blower doth protest too much.

The housing bubble was Greenspan’s doing pure and simple. He gave birth to it, nurtured it, protected it, and guided it during every stage of its development. In fact, if there was a deck of playing cards featuring the key players in this debacle, Alan Greenspan would be the ace of spades. The fact that the media still holds this joker in such high esteem is a testament to just how clueless they are. Rather than fawning over his every word, journalists should be grilling him like a CIA interrogator.

In his new post-Fed incarnation, Greenspan does show an increased willingness to speak the truth … perhaps sharp candor generates higher speaking fees the murky academic jargon. However, conveniently missing from his belated admission that home prices are too high is that his irresponsible monetary policies propelled prices to those heights in the first place. In fact, even as the housing bubble was inflating, Greenspan repeatedly denied its existence. He took every opportunity to talk the real estate market up and went out of his way to justify irrationally high home prices.

His concerns about upside down mortgages are particularly offensive given his consistent praise, when he was Fed Chairman, of the ability of home equity extractions to fuel economic growth. In fact, during the final years of his tenure there was no greater proponent for cash out re-financing than Alan Greenspan. Not only did the Maestro routinely commend homeowners for their sophisticated approach to “managing their home equity”, but he applauded Wall Street and mortgage lenders for their creativity and ingenuity. Of course, home equity extractions are largely responsible for so many homeowners now owing more than their homes are worth!

His most brazen contention was that he had tried to warn us of the dangers that Fannie and Freddie could pose to the entire economy. Excuse me, but when exactly did he sound this alarm? His points that Fannie and Freddie should not exist, and that the moral hazard of private profits and socialized losses is an accident waiting to happen would have been right on point had he actually made them while still Fed Chairman. Too bad Maria Bartiromo did not remind Greenspan that the accident has already taken place. Fannie and Freddie’s flawed design may have rendered them destined to slip but it was Greenspan himself who supplied the banana peel.

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He created a lot of this mess, so why doesn't he STFU

If you accept the principle that booms and busts can be timed and manipulated for the benefit of the very wealthy, then he and his successor have both done their jobs very well.

(Sorry, I just miss injin.)

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Don't Panic, some covert US government group will silence him, then the banks and government can carrying on the scam.

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This is Peter Schiffs latest economic commentary and it is critical of Greenspan. However I think it is hypocritical of people

like Schiff who believe in the free market liassez faire capitalism to be critical because Greenspan has only followed and implemented the very same policies schiff himself extols.

Absolute nonsense. Can you explain how Schiff extols the same policies as Greenspan? Schiff was calling for higher interest rates and Greenspan kept them at 1% a year into the recovery of the dotcom crash...You obviously don't know much about either Schiffs or Greenspans economic beliefs...

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Absolute nonsense. Can you explain how Schiff extols the same policies as Greenspan? Schiff was calling for higher interest rates and Greenspan kept them at 1% a year into the recovery of the dotcom crash...You obviously don't know much about either Schiffs or Greenspans economic beliefs...

Ideologicaly both Greenspan and Schiff are cut from the same cloth.

They both believe in the free market, laissez faire capitalism and neo liberal policies.

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Greenspan is goldbug and has advocated the gold standard since 1950s/60s, it was in his interests to encourage laissez faire and kill fiat and expose its evil.

I wonder if he has succeeded?

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Guest Steve Cook
Ideologicaly both Greenspan and Schiff are cut from the same cloth.

They both believe in the free market, laissez faire capitalism and neo liberal policies.

They are cut from the same cloth in the sense that they both believe that the "free market", "laissez faire capitalism" and "neo liberal" polices are useful vehicles for futhering the interests of the ruling elites.

Of course, when the above policies no longer serve as useful vehicles, brute force and outright suppression of the proletariat is always a bottom line alternative.......

Edited by Steve Cook

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Ideologicaly both Greenspan and Schiff are cut from the same cloth.

They both believe in the free market, laissez faire capitalism and neo liberal policies.

But isn't the difference between them, the fact the Schiff states that the market should dictate interest rates and not central banks (in a non-fiat system) and if some people lend at rates too low, they get burned (rather than bailed) and too high - well no-one borrows.

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But isn't the difference between them, the fact the Schiff states that the market should dictate interest rates and not central banks (in a non-fiat system) and if some people lend at rates too low, they get burned (rather than bailed) and too high - well no-one borrows.

Yes. Schiff believes that capitalists should take the losses as well as the profits, and if they suffer major losses should go out of business. They should live and die by the market. But this is a noble stance that he can afford to take because he is a sort of maverick investor. But in the real world people who are in positions of power with the same ideology cannot afford to be expected to stick to their principles. They will use taxpayers money to bail their powerful friends in Wall street out every time.

Market forces are only for the poor, welfare is for the rich.

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Anyone feel like explaining what they think they mean when they say "neo liberal" vs "liberal - classique" for example?

Chomsky on "neoliberalism"

It's not my term. I'm just borrowing it from standard usage.

The "neo" part is supposed to indicate that it is a novel version of "liberalism," which is to be understood in the sense of classical liberalism, the market doctrines of Smith, Ricardo, etc. The terminology is highly misleading: the doctrines are scarcely those of classical liberalism, and the current version is centuries-old; in fact, the selective imposition of the doctrines on the defenseless, while they were freely violated by the powerful, is a good part of the reason for the current divide between the 1st and 3d world, much more similar 2 centuries ago.

Current "neoliberal" doctrine is sometimes called "the Washington consensus," a term that is more apt. The reference is to the prescriptions of the International Financial Institutions (World Bank, IMF) and the rich countries (G-7 mainly, primarily the US).

These include cutback of social programs and public expenditures ("fiscal discipline"), tax reductions (particularly for the rich), deregulation, freedom for foreign investors, freeing up financial flows (so that the local wealthy can export capital at will and foreign speculators are free from constraints -- a good part of what lay behind the Latin American "debt crisis" and the current Asia crisis), privatization (so that foreign investors and local fatcats, usually in bed with the rulers, can pick up the country's assets), etc.

As noted, the doctrines are not novel. Nor is their selectivity.

The rich, the US in the lead, violate the prescriptions whenever they can get away with it, as before.

Noam Chomsky

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http://www.guardian.co.uk/business/2008/au...tcrunch.banking

Alan Greenspan, former Federal Reserve chairman, has warned that more banks and financial institutions could end up being bailed out by governments before the credit crunch is over.

Writing in the Financial Times today, he said that stability has not been restored to the financial sector even though central banks have injected billions of pounds in liquidity, and warned that fears of insolvency still persist.

"There may be numbers of banks and other financial institutions that, at the edge of defaulting, will end up being bailed out by governments," he said.

He added that the insolvency crisis will come to an end only when house prices in the US even out. Equity in US homes, he said, was the "ultimate collateral support" for much of the financial world's mortgage-backed securities.

However, the glut of vacant single-family homes that emerged as the US housing boom peaked in 2006 is making it difficult for prices to stabilise.

The UK government was forced to take Northern Rock into public ownership earlier this year, after the credit crunch left it unable to survive as a private company. Today the bank posted a loss of almost £600m for the first half of 2008, as more borrowers struggled to pay their mortgages.

Greenspan said there were signs of hope for the future of global markets from non-financial corporate businesses which he said had held up "surprisingly well" in the face of volatile stock markets. Global stock prices are a fifth lower than their October 2007 peaks - with the FTSE 100 index dropping by 16.7% in a year - but they still hover at levels last seen in 2006 when markets were far less gripped by fear.

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Remember Big* Al's conundrum? During the years when Gordon was pumping up house prices in this country with deregulated credit markets, overlooked liar loans and tax breaks for BTL Al was hiking IR every month and each time he hiked the marketplace IRs dropped. Why? Sub-prime and cheap Asian credit. Al's conundrum was simply the more he hiked the more the rates fell. He knew a bubble was forming, and warned the markets years ago that irrational exuberance had taken hold in housing, but the Fed lacked the power to control the markets with the Fed IR.

Gordon does not have the same excuse. His creation, the "indepenedent" BoE actually dropped IR in August 2005 to kick off another 2 years worth of HPI. It was hands off the lenders and drop the taxes on BTL as HPI and MEW was the key to never ending growth.

__________________

* Alan Hamish Greenspan is over 6' 6" tall.

Edited by Realistbear

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http://www.reuters.com/article/marketsNews...344130720080803

NEW YORK, Aug 3 (Reuters) - The United States is in the second inning of a recession that will last for at least 18 months and help kill off hundreds of banks, influential economist and New York University Professor Nouriel Roubini told Barron's in Sunday's edition.

Taxpayers will pay a big price for helping bail out the rest of the financial services industry as well, Roubini said -- at least $1 trillion and more likely $2 trillion.

The banks will become insolvent because of mounting losses as a result of the housing bust and because they have only written down their subprime loans so far, he said. Still in front of them are their consumer-credit losses, for which they lack the reserves, Barron's reported.

He also said there are hundreds of millions of dollars outstanding in home-equity loans that could be worth zero, too.

U.S. consumers, meanwhile, are "shopped out" and saving less, while the Federal Reserve's performance in handling the crisis has been poor, Roubini said, because it failed to see that the problem extended beyond subprime mortgage debt.

The good old taxpayer they are very generous helping out the banks whilst they get their houses repossessed.

There's moral hazard for you.

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  • 399 Brexit, House prices and Summer 2020

    1. 1. Including the effects Brexit, where do you think average UK house prices will be relative to now in June 2020?


      • down 5% +
      • down 2.5%
      • Even
      • up 2.5%
      • up 5%



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