The Alan Greenspan Paradox: Economics From a Parallel Universe
Is he a liar? Is he just clueless? Or does he live in a parallel universe? From Center for Economic Policy and Research: “Greenspan also said he believes that the sharp rise in gold prices is due to market concerns about inflation taking off in the long run. He noted how there has never been such a major expansion of credit in U.S. economic history.” Let’s look this one up. There is an organization called the “Federal Reserve Board” that puts out really good data on credit. If we look at its most recent Flow of Funds accounts , we see that credit for the economy as a whole expanded at a 3.0 percent annual rate in 2009, a 4.2 percent annual rate in 2010, and a 2.3 percent annual rate in the first quarter of 2011, the most recent quarter for which data is available. Has there ever been “such a major expansion of credit in U.S. economic history?” Well, actually credit expanded more rapidly than the 4.2 percent rate in 2010 in every single year that Greenspan chaired the Fed. In fact, it expanded more rapidly in every year in this series (going back to 1976) and probably every year since the Great Depression. In other words, for Alan Greenspan night is day, up is down, he is looking at an extraordinarily slow pace of credit expansion and telling reporters that is the fastest on record… read on The media built him up for some reason. Maybe it was the glasses or his love of Ayn Rand, but usually they then tear you down after you get everything wrong. However, Alan escapes that path and still hangs around to sprout off nonsense that is usually listened to by the confidence fairies. Matt Taibbi wrote an excellent chapter on Greenspan in his book Griftopia and talks about it in this interview: Taibbi: Greenspan is a classic con man. A guy who reached power by sounding smart and giving pretty speeches to politicians who didn’t know what he was talking about much of the time. He’s like religious con men who get to where they are by saying vague things and letting people reach their own interpretation. And he stayed in power by giving the powerful what they wanted. There were disastrous consequences for everybody but him. In the process, he presided over this period where more and more political decisions were moved to unaccountable financial bureaucracies. That’s a big part of the story too: how guys like him gained power and the politicians officially lost power. Greenspan’s whole career was built on media exposure. He was romantically involved with key members of the media, such as Barbara Walters and NBC’s Andrea Mitchell, who is his wife. He was very, very cunning in getting people to write articles about what a genius he was. That’s how he got into power: first economist to make the cover of Newsweek. He established himself as an infallible oracle, and a lot of it had to do with his ability to seduce key media figures, sometimes literally. In the book, I show his record as an actual economist was complete shit. And here’s another interview: AVC: There’s an entire chapter in Griftopia devoted to systematically dismantling the character of former Fed chairman Alan Greenspan. It’s called “The Biggest Asshole In The World.” Maybe we should just start with that title. MT: [Laughs.] There are three things going on with Greenspan, three reasons why I thought it was worthwhile doing that chapter, and doing it in that way. He had a specific role, as a politician, in the sense that he was one of the primary people pushing deregulation—and a specific kind of deregulation—that ended up being a major factor in the crisis. So there was that. Then there was the second thing, which was his role as the head of the Fed, which basically allowed Wall Street to bail itself out every time it got into a speculative disaster. And then the third thing was, he was really a symbol of the kind of mindset, the ideology, that sort of Ayn Randian belief in complete and total deregulation, and the cult of the producer, and all of that stuff. The superficial pushing of that ideology, on the one hand. On the other hand, the sort of backdoor use of the government as an insurance policy and welfare program for the financial-services industry. Those contradictions were so perfectly symbolized in Greenspan, I just thought he was the ideal way to start out the whole discussion of what Wall Street was all about. He had a specific role as a villain, and he also had a sort of general role as an ideological leader of everything that went wrong.
The Alan Greenspan Paradox: Economics From a Parallel Universe
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on August 24, 2011. Filed under