Greenspan: "No Regrets"

Does being a former Fed chairman mean never having to say you’re sorry?

In Oslo, Greenspan maintained that the housing bubble was not due to negative real interest rates in the US, but instead was a “global phenomenon.” He is thus arguing that housing price appreciation in various markets resulted from a common source that had nothing to do with the Fed, rather than being a concurrent phenomenon in a number of national markets. Note there was a similar housing boom and recession in the late 1980s and early 1990s, yet I don’t recall any central banker then trying to assign blame to mysterious global sources, say the gnome of Zurich, or in this case, excessive global liquidity spurred by access to nearly-free money in Japan (i.e,, the carry trade). But even if you accept that thesis, with negative real rates in the US, it was for a time a source of effectively free money as well.

From Bloomberg:

Former Federal Reserve Chairman Alan Greenspan said he has “no particular regrets” and that the deepening slump in the U.S. housing market isn’t a result of his policies.

“Markets are becoming aware of the fact that the decline in house prices is not stopping,” Greenspan said today in Oslo. “I have no particular regrets. The housing bubble is not a reflection of what we did, as it is a global phenomenon.”…..

The collapse of the U.S. subprime market “was a shocker because no one expected it,” Greenspan said. “It was the weakest link in the international financial sector.”….

“The decline in subprime-financed housing starts is over,” Greenspan said. “It went to zero and can’t get any lower.”

Joseph Stiglitz, a Nobel Prize-winning economist, said Nov. 16 that there is a 50 percent chance that the U.S. will slide into a recession after the “mess” left by Greenspan. The retired Fed chairman defended his record in a statement released the same day, saying the criticisms were “inaccurate or incomplete.”

After the 2001 recession, the Fed cut its benchmark rate to a four-decade low of 1 percent. That move, along with a hands-off approach to regulation, has brought Greenspan under fire as the bursting of the housing bubble and the subprime mortgage crisis threaten to sink the economy.

“The fact that the Fed fund rate went down to 1 percent in 2002 was an important part of the latter stages of the housing boom,” said Bruce Kasman, chief economist at JPMorgan Securities Inc. “It wasn’t the only thing, and it wasn’t necessarily a bad thing. In the end, we’re going to look back at what happens next to recognize what the trade-offs were.”

Greenspan said on Nov. 7 there is a “less than 50-50” chance of a U.S. recession, reiterating remarks made in late October. He didn’t give a view on the chances today…..

“Stable prices are necessary for maximum sustainable economic growth,” Greenspan said. “To an extent that a weaker dollar is of such a magnitude that it creates serious problem, it needs to be addressed by policy makers.”

An interesting counterpoint to the Greenspan defense is Paul Krugman’s New York Times op-ed piece today, “Banks Gone Wild,” which mainly beefs about inflated pay to the CEOs who helped create this mess, but also has this comment:

This slump was both predictable and predicted. “These days,” I wrote in August 2005, “Americans make a living selling each other houses, paid for with money borrowed from the Chinese. Somehow, that doesn’t seem like a sustainable lifestyle.” It wasn’t.

But even as the danger signs multiplied, Wall Street piled into bonds backed by dubious home mortgages. Most of the bad investments now shaking the financial world seem to have been made in the final frenzy of the housing bubble, or even after the bubble began to deflate.

In fact, according to Fortune, Merrill Lynch made its biggest purchases of bad debt in the first half of this year — after the subprime crisis had already become public knowledge.

Now the bill is coming due, and almost everyone — that is, almost everyone except the people responsible — is having to pay…..

How did things go so wrong?

Part of the answer is that people who should have been alert to the dangers, and taken precautionary measures, instead blithely assured Americans that everything was fine, and even encouraged them to take out risky mortgages. Yes, Alan Greenspan, that means you.

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  1. revolution

    Alan “Creative Destruction” Greenspan and The Permanent Revolution

    An open letter and Patriotic Plea to all Patriots:

    The combined American Patriot Elite and Patriot Elite Organizations must read Alan Greenspan’s recently released autobiography, The Age of Turbulence: Adventures in a New World. This is not an endorsement to buy the book. It is a request that legitimate Patriots make the sacrifice to go to their local library, check it out and read it.


    This book is potentially the equal (if not more so) to Dr. Carroll Quigley’s
    Tragedy and Hope as the single most influential expose and description of the sinister/unseen “Secret Elite’s” New World Order. The two books are not synonymous.

    Quigley’s Tragedy and Hope identifies the “Secret Elite” as members of Cecil Rhodes’ Round Table Groups that supposedly founded the infamous (used to be very secretive but now is very public) Council on Foreign Relations (CFR). Quigley goes out of his way to totally ignore (leave out of historical analysis) the
    continued existence of the Fabian Society in Tragedy and Hope (page
    949)…describing the Fabians as a “myth, a folk fairy tale”…non-existent.

    Greenspan’s The Age of Turbulence, in contrast, totally recognizes the great influence and dominance of the Fabian Society upon Western, American/British Capitalist society. Greenspan goes one step farther than Quigley.

    “Unlike Marx, the Fabian Socialists of the late nineteenth century were not looking for revolution. The group named itself after the ancient Roman General Fabius, who held off Hannibal’s invading army with a military strategy of attrition rather than all-out confrontation. Similarly, the Fabians aimed not to destroy capitalism…

    …The Fabians laid the groundwork for modern social democracy, and their influence on the world would end up being at least as powerful as that of Marx. While capitalism succeeded brilliantly in delivering higher and higher standards of living for workers throughout the nineteenth and twentieth centuries, it was the tempering effect of Fabian socialism that many argued would make market economics politically palatable and keep communism from spreading.” (P. 264-265)

    Greenspan recognizes a different “true-enemy” to this Republic’s Perpetual Union based on the concept of National Sovereignty (Nationalism/Nativism) and state sponsored Protectionism.

    What is this “true-enemy” of our Nation?

    The answer to this question requires real Patriotic-Courage to accept. The Patriot Community Elite has based their perception of the “true-enemy”described in pages 950-952 of Tragedy and Hope for 50 years. Quigley describes a flesh and blood “Secret Elite” (people/conspirators).

    Greenspan, in contrast, identifies a quite different “true-enemy.” This
    “true-enemy” does not gather in groups of “secret-conspiracies.” It has no finger prints, blond hair, blue eyes, big ears or strong-Semitic features for that matter. Greenspan’s “true-enemy” is an it, a thing…a system…an economic process. It is even considered the “basis of all life” in this Republic.

    All long-standing Patriots (to include all the Ron Paul Patriotic newcomers) are requested to remain seated if they choose to read on.

    The enemy Greenspan clearly identifies is the process known as Creative Destruction. Greenspan, former Chairman of the dreaded “Secret Elite’s” Federal Reserve, has known about the existence of Creative Destruction his entire adult life. Yet, 50 years of Patriotic-Prophecies has said literally nothing about the existence of Creative Destruction…due to Patriot Elite blindness that has been self-induced with the worship of Quigley’s Tragedy and Hope. There is another reason for this Patriot-blindness. This is where Patriotic Courage comes in. Recognition of Creative Destruction requires the Patriot Elite to commit what would be considered a very “Treasonous-Marxist-Thought.” Acceptance of the actual reality/existence of Creative Destruction requires the Patriot to understand…the “true-enemy” of the continued existence of the Perpetual Union and the Republic is…American/British Capitalism…not International Terrorism, not communist Revolutionaries and not Tyrants that promote War.

    What is Creative Destruction?

    Alan Greenspan did not invent the concept of Creative Destruction. The term Creative Destruction was the brain-child of Joseph A. Schumpeter. Joseph Schumpeter is considered Harvard’s most esteemed professor of Economics for the 20th Century. Schumpeter was an exile from the Austrian School of Economics (1920s) and spent a short stay at the Fabian London School of Economics before coming to America. If “you know where to look” you’ll find Creative Destruction (Neo-conservatism) was the basis of the Reagan Revolution…something the Patriot Elite Community missed completely back in the 1980s…just as they do today.

    At the end of his long economic journey Schumpeter wrote a real block-buster of a book in 1942…Capitalism, Socialism and Democracy. This book is more than an “equal” to Tragedy and Hope and The Age of Turbulence. The Patriot Elite have been silent about Schumpeter.

    Schumpeter described the economic process of Creative Destruction as follows (from Capitalism, Socialism and Democracy),

    “…the history of the productive apparatus…is a history of
    revolutions…” (P. 83)

    The above term “productive apparatus” is a simple reference to the means of production known as CAPITALISM.

    “…The opening of new markets, foreign or domestic, and the organizational development from the craft shop and factory to such concerns as U. S. Steel illustrate the same process of industrial mutation…that incessantly revolutionizes the economic structure from within, incessantly destroying the old one, incessantly creating a new one.” (P. 83)

    This is a clear description of present-day CAPITALISM….a result of
    constant-mutation, a continuos-cycle of revolution..

    “Those revolutions are not strictly incessant; they occur in discrete
    rushes which are separated from each other by spans of comparative quiet. The process as a whole works incessantly however, in the sense that there is always either revolution or the absorption of revolution, both together forming what are known as business cycles.” (P. 83)

    Translated: Capitalism’s existence is dependent on a constant state of
    revolution…Permanent Revolution.

    “This process of Creative Destruction is the essential point about Capitalism. It is what capitalism consists in and what every capitalist concern has got to live in.”

    In 1942 Joseph Schumpeter described CAPITALISM as a constant State of Permanent Revolution and Creative Destruction.

    Please Patriots…ponder this Paradox. Do not feel ashamed, many others have missed the point,

    “The essential point to grasp is that in dealing with capitalism, we are dealing with an evolutionary process. It may seem strange that anyone can fail to see soobvious fact which moreover was long ago emphasized by Karl Marx…

    Capitalism, then, is by nature a form or method of economic change and not only never is but never can be stationary. And this evolutionary character of the capitalist process is not merely due to the fact that economic life goes on in a social and natural environment which changes and by its changes alters the economic data of economic action; this fact is important and these changes (wars, revolutions and so on) often condition industrial change, but they are not the prime movers. Nor is this evolutionary character due to quasi-automatic increase in population and capital or to the vagaries of monetary systems of which exactly the same thing holds true. The fundamental impulse that sets and keeps the capitalist engine in motion comes from the new consumers’ goods, the new methods of production or transportation, the new markets, the new forms of industrial organization that capitalist enterprise creates.” (P. 82)

    Please re-read the above quotes several times.

    Make sure you understand what you have just read. If you do not comprehend the above reality, you won’t realize the problem,

    “In other words, the problem that is usually being visualized is how capitalism administers existing structures, whereas the relevant problem is how it creates and destroys them. As long as this is not recognized, the investigator does a meaningless job.” (Emphasis added)

    Point #1: The Patriot Elite has done “a meaningless job” for 50 years. Why?

    Long-standing and the “most respected” Patriot Elites have continually failed to recognize (seemingly by choice) an undeniable reality (the obvious). This reality (the obvious) is a Constant State of Permanent Capitalist Revolution known as Creative Destruction. Alan Greenspan, former head of the dreaded and most feared Federal Reserve, precisely observes in his An age of Turbulence,

    “Working with heavy industry gave me a profound appreciation of the central dynamic of capitalism. ‘Creative Destruction’ is an idea that was articulated by the Harvard economist Joseph Schumpeter in 1942. Like many powerful ideas, his is simple: A market economy will incessantly revitalize itself from within by scrapping old and failing businesses and then reallocating resources to newer, more productive ones. I read Schumpeter in my twenties and always thought he was right, and I’ve watched the process at work.” (P. 48) (Emphasis in the original)

    Point #2: While the Patriot Elite “worries/terrorizes” their readers about
    abortion, life style choices, racial divisions, ethic clashes, immigration, the North American Union, Public Private Partnership, NAFTA , WTO, GATT, (and this list can go on and on) the Constant State of Permanent Revolution known as Creative Destruction continues unabated, unchallenged and unrecognized…unseen and unheard of.

    Please do not assume this essay is written by a lone-paranoid with a weird and unbelievable Conspiracy Theory. Just because Patriot-Icons have not mentioned or have publically recognized the constant reality of Creative Destruction…does not make this Constant Sate of Permanent Revolution any less real.

    Not convinced? There are others that do correctly understand and recognize the reality of the Permanent Revolution. For a recent-random sample off the internet (from “The New Capitalism,” Financial Times, Martin Wolf, June 19, 2007),

    “It is capitalism, not communism, that generates what the communist Leon Trotsky once called “permanent revolution.” It is the only economic system of which that is true. Joseph Schumpeter called it ‘Creative Destruction.’ Now after the fall of its adversary, has come another revolutionary period. Capitalism is mutating once again.”

    It is not hard to verify the reality of the Permanent Revolution…that is if you want to.

    Point #3: It is most important to recognize the existence of Creative Destruction. If one does not, any attempt at historical analysis will be fruitless and completely useless…for example, placing Adam Smith correctly in the history of CAPITALISM. Many Patriots (from across the false political Spectrum) would all agree this Republic’s economic success was based on the “Free Enterprise” concepts (the Hidden-Hand) of Smith’s Classical Economic Theory of Development. But this is not a correct analysis because the many political and Patriotic Pundits have failed to recognize the process of Creative Destruction.

    If you add a dash of Creative Destruction to Adam Smith the historical analysis goes like this (from p. 260 of The Age of Turbulence),

    “It is striking to me that our ideas about the efficacy of market
    competition have remained essentially unchanged since the eighteenth century Enlightenment, when they first emerged, to a remarkable extent, largely from the mind of one man, Adam Smith. With the demise of central planning at the end of the twentieth century, the forces of capitalism have had free reign, prodded by ever-expanding globalization…

    …Still, in a sense, the history of market competition and the capitalism it represents is the story of the ebb and flow of Smith’s ideas. Accordingly, the story of his work and its reception repays special attention…which addresses the great problem inherent in capitalism: that creative destruction is often, and by a great many, viewed as destruction. The history of Smith’s ideas is the history of attitudes toward the social dislocation capitalism brings and its potential remedies.”

    Point #4: There is no difference in the economic and political theories of Adam Smith, Karl Marx, Leon Trotsky, Joseph Schumpeter, Reaganomics and Alan Greenspan…they are all about and describe the same process…the Constant State of Permanent Revolution, today known as Creative Destruction.

    Point #5: The Fabians hold major Political sway in the 21st Century. They dominate almost all important political positions of the Queen’s (and Future King’s) government. Fabians (and their unseen agents of penetration and permeation) have dominated the American Neo-conservative movement, most notably the Heritage Foundation, since 1979. Fabians dominate the Republican Party through the Fabian creation known as the International Democrat Union (an international socialist organization). Fabians also dominate the Democratic Party through the Third Way (founded by the Fabian Tony Blair)…again the Patriot Elite has been mostly silent to even this most basic reality.

    The 20th Century bares witness to the State of Permanent Revolution of Creative Destruction…The 1905 Russo-Japanese War, the 1905 Russian Revolution, WWI, The 1917 Bolshevik Revolution, the Fascist Revolution of Italy the National Socialist Revolution of Germany, WWII, Korea, Viet Nam, Iraq, Afghanistan. “All these Wars, Revolutions and so on” give proof that American/British Capitalism is the “true-enemy” of all existing governments and societies.

    To ignore this reality…just because it “offends” existing “political myths”… is a very large mistake.

    Alan “Creative Destruction” Greenspan estimates Globalization (the final
    implementation of American/British Capitalism as the sole means of production for planet Earth) will be complete around the year 2030 (27 short years from now). Globalization is a cover-term for…the Constant State of Permanent Revolution and Creative Destruction.

    Patriots must decide the future path of this Republic and its Perpetual Union…not the Fabians. Surely the Patriot Elite must come to openly understand the path of The American Revolution of the Founding Fathers is not the path of Permanent Revolution. It is impossible to produce an accurate description of the present reality (and recent historic past) by not recognizing the reality of the Permanent Revolution.

    As the Patriot Elite continues to ignore “the obvious” reality of the Permanent Revolution the state of American Patriotic Alternative Politics will remain in a useless limbo. Or, as Mark Danner observed on page 47 of his 2006 little read book The Secret Way to War, concerning the on-purpose ignoring of “the obvious,”

    “In the United States when it comes to this central issue in our politics we have in general been treated to the vaguely depressing spectacle of a great many intelligent people struggling hard to make themselves stupid.”

    Wake up America, time is running short. The choice is really simple. And yes…it is at the same time a most difficult choice to make…accepting the sad reality American/British Capitalism has become the “American Way of Life,” replacing the American Revolution.

    Which path America? Nationalism or Globalization. Can’t have both at the same time. One or the other.

    Just remember American/British Capitalism has continually destroyed entire long-standing societies for the better part of 100 years with a continuous cycle of War, Revolution and Terror. And as yet…there is no cure for Capitalism….short of its total elimination. As long as American/British Capitalism continues to exist and expand completely unfettered, the American Republic and its Perpetual Union will continue its present path to the “Scrap-Heap of History.”

    In summary: Conspiracies and Conspirators have come and gone over the last 100 or so years. The only constant (still unseen) thread during this same period is the continual existence and evolution of CAPITALISM…and so far the present and past Patriotic Elite has completely missed (on-purpose or otherwise) this most simple and obvious political reality.

  2. Anonymous

    The previous commentor forgot to mention the part about poisoning our precious bodily fluids. Consider yourself warned.

  3. a

    I think Greenspan’s principal defense (as mentioned in Bloomberg) is that asset prices have gone up throughout the world. They’ve gone up in England, in Spain, in Australia. Since he didn’t have control over their interest rates he’s not responsible. QED.

    Well yes and no. It’s the Greenspan Fed which established the orthodoxy that financial bubbles can’t be managed until after they have burst. Other central banks didn’t *have* to follow that, but to do so would have required them to undo a wave of investment coming from the U.S. (e.g. GS buying tons of apartment blocks in Paris). So foreign central banks’ jobs were even more difficult than the Fed’s; and yes it does seem to me that the Fed, of all the central banks, takes primary responsibility.

  4. Anonymous

    Let’s see.

    A failed businessman (Greenspan) gets to be Fed Chairman.

    And a many times failed businessman (Bush) gets to be president of the US.

    Of course nothing will be learned from this. It’s the US afterall.


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