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(Bubbles) Greenspan: "Oops"

by Jerome a Paris Mon Sep 17th, 2007 at 04:46:11 AM EST


Greenspan alert on US house prices

US house prices are likely to fall significantly from their present levels, Alan Greenspan has told the Financial Times, admitting that there was a bubble in the US housing market.

Now he tells us! Now that, after encouraging the bubble, blowing it out of proportion, and claiming that it was not possible to tell if there was a bubble, said bubble is blowing in our faces as many observers have predicted for a number of years now, he claims that it was obvious all along.

What a lying piece of shit.

Initially posted on DocuDharma.



In an interview ahead of the release on Monday of his widely-anticipated memoirs, the former chairman of the Federal Reserve said the decline in house prices "is going to be larger than most people expect".

That's only because most people chose to believe his lies over the warnings of those that said that incredibly cheap debt and the "Greenspan put" (the idea, turned reality in 1987, 1997, 1998, 2001, that the Fed would rescue the markets by lowering interest rates should any big crisis strike) were a recipe for worsening bubbles, and of those that suggested that maybe central banks should worry about asset price inflation (like European Central Bank chairman Jean-Claude Trichet, who was widely mocked then for his quaint ideas). I've been writing diaries for close to 3 years on that topic, and the existence of a bubble has been blindingly obvious to me all along.


He said the price of risk had fallen to unsustainably low levels beforehand, with investors addicted to asset-backed securities that offered some additional yield over Treasury bonds as if they were "cocaine". Mr Greenspan said this demand induced the big increase in the origination of subprime mortgages by mortgage brokers.

"Cocaine", heh? Strong words. Yeah, people started takng too much risk because they made no money whatsoever on normal transactions precisely because the Greenspan Fed kept rates low and brought the remuneration for safe assets incredibly low. Borrowing money was cheap, but investing it required taking increasing risks; but risky investing was done precisely because the money to do so was made available cheaply all along... Thus a bubble of over-investing, increasingly focused on silly (but initially profitable) investments.


Mr Greenspan said the off-balance sheet investment vehicles that issued much of the asset-backed commercial paper represented a "savings and loans disaster waiting to happen" because of the mismatch between their assets and liabilities.

Indeed. And he did what about it? Nothing? Yep. Can he be blamed for that? Yep.

Of course, we should note carefully what he says, because it is yet another indictment of the Bush administration, but we should never forget that he was completely part of their economic strategy, and never protested against it despite his wide powers to do so. He is indicting himself today. Bush cannot be blamed for it all. He was helped, by accomplices, sycophants and by those that could not be bothered. Whether they were clueless, or cowards, or profiteers who thought they could get away with it, they are responsible.

And "Bubbles" Greenspan is more responsible than most.

Display:
What is this "responsible" you speak of? Isn't that for foreigners and little people?
by Colman (colman at eurotrib.com) on Mon Sep 17th, 2007 at 05:41:13 AM EST
like «fairplay» and following the rules.

In the long run, we're all dead. John Maynard Keynes
by Jerome a Paris (etg@eurotrib.com) on Mon Sep 17th, 2007 at 06:38:26 AM EST
[ Parent ]
What a lying piece of shit

That's a bit unparliamentary, Jerome, whether feelings run high or not...

Not really for the ET front page IMHO.

by Solveig (link2ageataol.com) on Mon Sep 17th, 2007 at 05:56:23 AM EST
Being polite doesn't seem to have got us very far ... there's been worse on the front-page, and there will be again.
by Colman (colman at eurotrib.com) on Mon Sep 17th, 2007 at 05:58:34 AM EST
[ Parent ]
Just a personal view....

I've never seen the use of strong language (and I'm no shrinking violet) as adding credibility to an argument and frequently seen the exact opposite.

by Solveig (link2ageataol.com) on Mon Sep 17th, 2007 at 06:07:38 AM EST
[ Parent ]
but in this case the disconnect between his claims and reality is just too damn big.

In the long run, we're all dead. John Maynard Keynes
by Jerome a Paris (etg@eurotrib.com) on Mon Sep 17th, 2007 at 08:11:41 AM EST
[ Parent ]
Mehhh....

This lacks the neccessary shock power to covey the deserved disgust Mr. Greenspan generates.

If you really want to start a fight you'd have called Bubbles this. That's the only one that has any shock value left, now that we puritanical Americans have the dirty mouths to match the Irish.

And I'll give my consent to any government that does not deny a man a living wage-Billy Bragg

by ManfromMiddletown (manfrommiddletown at lycos dot com) on Mon Sep 17th, 2007 at 09:40:15 AM EST
[ Parent ]
Although I principially agree with your note, Solveig, I often wonder - being a non-native-english-speaker myself, if cursing in a foreign language is easier and less controversal than cursing in one's own.

which is true at least in my case.

I love "bugger", which right after "Pflaumenkuchen", is my second favorite swear word.

coming back to the article. The reception Greenspan is getting is really quite interesting. He really is regarded as the Oracle - albeith much more clearly spoken. Old Bubbles knows best. The UK market will be hit worse than the US market, (doomongering British press) - The Euro will replace the Dollar as dominant world currency (europhile German press).

Funny how that works.

by PeWi on Mon Sep 17th, 2007 at 06:06:02 AM EST
[ Parent ]
I have to agree with Coleman, Solveig. It's time to call a spade a spade.

Money is a sign of Poverty - Culture Saying
by RogueTrooper on Mon Sep 17th, 2007 at 06:07:03 AM EST
[ Parent ]
The spade is that he's really saying:

  1. It's okay to lie as long as you make a profit

  2. It's okay to avoid personal responsibility, as long as you make a profit

  3. It's okay to have no personal or professional integrity when in a position of authority

  4. Expediency is everything

Whether the final verdict on that list is unparliamentary is left as an exercise for the reader.
by ThatBritGuy (thatbritguy (at) googlemail.com) on Mon Sep 17th, 2007 at 06:34:10 AM EST
[ Parent ]
I said "he can die in a fire" on another site.

you are the media you consume.

by MillMan (millguy at gmail) on Mon Sep 17th, 2007 at 01:01:37 PM EST
[ Parent ]
It kind of jarred me as well. However, I don't if that is just because I'm not used to somewhat inelegant (and undescriptive) insults being used for public figures or that it actually is inappropriate. Much of what seems inappropriate is merely habit.
by R343L (reverse qw/ten.cinos@l343r/) on Mon Sep 17th, 2007 at 01:03:57 PM EST
[ Parent ]
Just to say that due to a bad case of lap top mobility this morning that it was me, rather than Solveig, concerning "Brownspan" (ie Greenspan as a ....).

She may well contribute a Norwegian epithet or two...

"The future is already here -- it's just not very evenly distributed" William Gibson

by ChrisCook (cojockathotmaildotcom) on Mon Sep 17th, 2007 at 06:14:24 AM EST
(OT--You should be able to log in as yourself on any machine, just go to the bit on the right (or left ;) that  says

ChrisCook (or Solveig)
-----------
User Pages
Comments
Diary
New Diary Entry
Logout ChrisCook (or Solveig)

You'll get taken to the "non member" version of ET, with DoDo's large and wecloming "New User, Click here!" banner at the top.  Look to the left (or right) and you'll find a "login" button and a space for your...

...a ha!  I don't know what you do if you've forgotten your password ;)

Don't fight forces, use them R. Buckminster Fuller.

by rg (leopold dot lepster at google mail dot com) on Mon Sep 17th, 2007 at 07:15:19 AM EST
[ Parent ]
Then you click "reset password" below the login boxes. I assume it will get you a temporary pwd mailed to the adress you used on signing up?

Sweden's finest (and perhaps only) collaborative, leftist e-newspaper Synapze.se
by A swedish kind of death on Mon Sep 17th, 2007 at 07:42:19 AM EST
[ Parent ]
I know all this: I was just careless and didn't look to see whose name was sitting on top of the page!

Doh...!

"The future is already here -- it's just not very evenly distributed" William Gibson

by ChrisCook (cojockathotmaildotcom) on Mon Sep 17th, 2007 at 08:03:28 AM EST
[ Parent ]
;)



Don't fight forces, use them R. Buckminster Fuller.

by rg (leopold dot lepster at google mail dot com) on Mon Sep 17th, 2007 at 08:10:58 AM EST
[ Parent ]
That's exactly what Chris said/did - how did you know?
by Solveig (link2ageataol.com) on Mon Sep 17th, 2007 at 08:54:36 AM EST
[ Parent ]
"But...are you Chris or Solveig?"

"I'm Solveig."

"Ah, but are you really Solveig?"

(If you've never watched the mighty boosh...and have a spare seven minutes or so...)



Don't fight forces, use them R. Buckminster Fuller.

by rg (leopold dot lepster at google mail dot com) on Mon Sep 17th, 2007 at 09:01:30 AM EST
[ Parent ]
The relevant part starts 4 minutes in.

Don't fight forces, use them R. Buckminster Fuller.
by rg (leopold dot lepster at google mail dot com) on Mon Sep 17th, 2007 at 09:03:39 AM EST
[ Parent ]
Hmmm, one of you is right, and one of you has an $8.5 million book deal.

Which one of you will be listened to more?

The fact is that what we're experiencing right now is a top-down disaster. -Paul Krugman

by dvx (dvx.clt št gmail dotcom) on Mon Sep 17th, 2007 at 06:38:01 AM EST
Mr Alan Greenspan is a mendacious stool.
by afew (afew(a in a circle)eurotrib_dot_com) on Mon Sep 17th, 2007 at 07:39:22 AM EST
Terminologically inexact turd?

"The future is already here -- it's just not very evenly distributed" William Gibson
by ChrisCook (cojockathotmaildotcom) on Mon Sep 17th, 2007 at 08:05:45 AM EST
[ Parent ]
Turd? Fie!
by afew (afew(a in a circle)eurotrib_dot_com) on Mon Sep 17th, 2007 at 08:12:37 AM EST
[ Parent ]
I'll vote for 'Morally malodorous faecal clump.'

(But only because I haven't had my tea yet.)

by ThatBritGuy (thatbritguy (at) googlemail.com) on Mon Sep 17th, 2007 at 12:44:55 PM EST
[ Parent ]
Unfortunately we do not control the organs of bullshit that so widely pollute the public media space, so this man, who had a book written about him titled 'Maestro' (excuse me while I go clear up my own vomit ...) is still more or less treated as some sort of skinny, aged, frail, diminutive, uber-Hercules of the intellectual and financial realms by the press. As far as I see, anyway.

This is of course one aspect of a more general problem, namely of the ever-present bulldust that poses as conventional wisdom. I literally cannot bear to endure mainstream media ... which is why I most lurk places like ET.

by wing26 on Mon Sep 17th, 2007 at 07:57:13 AM EST
The oniy thing Bush is a roaring success at is moral inversion - corruption becomes virtue, stupidity becomes genius, cowardice becomes patriotism, greed becomes philanthrophy, and chaos becomes stability.

Discovering that Greenspan is just another corrupt little self-aggrandising Republican toady shouldn't surprise anyone.

It's the fact that this slimy little man is still being praised for his genius even after he ramraided the world economy and took a joy ride off a cliff - deliberately, because it made him richer, and made his patrons richer, and because he wanted to, and could.

What is it going to take before we start seeing some reality and integrity in the media mainstream?

by ThatBritGuy (thatbritguy (at) googlemail.com) on Mon Sep 17th, 2007 at 08:11:02 AM EST
[ Parent ]
That's the mind-boggling thing, of course. It really doesn't matter what happens, the MSM just plays along with any demurral. The world could end and we would be getting exactly the same narratives as always as it did so.

I used to get BBC World, but after the invasion of Afghanistan I realized it was the most appalling codswallop ... and after the invasion of Iraq I realized I might as well cancel it altogether, rather than risk inujuring myself by sticking my foot through the TV.

Still, there were some amusing moments, such as when they ocassionally booked the wrong economist for a take on events. They had Dean Baker of the Center for Economic Policy Research on there once. He proceeded to tell them what a crock intellectual property rights were or somesuch. Everyone looked very surprised and you could see them thinking 'who booked this guy?' and 'well we're not having him on here again ...' They even did the same during the invasion of Iraq, where a testy UK military expert with an ounce of integrity denounced BBC correspondents for reading from the script with garbage about the 'coalition' needing to capture Um Qasr 'to get that humanitarian aid in.' 'No, no,' he said, 'Um Qasr is a major deep water port and it is needed for military purposes, and I'm getting a bit sick of everyone saying it's got something to do with humanitarian purposes.' Well, they didn't have him on again either.

These were, of course, simple stuff-ups and in no way redeem the MSM organs. I suppose BBC incompetence can be praised for occasionaly letting through one or two glimpses of truth and humour, but it certainly isn't deliberate.

by wing26 on Mon Sep 17th, 2007 at 11:35:31 AM EST
[ Parent ]
Aaaghh ... 'without any demurral', of course.
by wing26 on Mon Sep 17th, 2007 at 11:36:13 AM EST
[ Parent ]
I turned on the TV this morning to find out that in his new book, Greenspan blames the Republicans for irresponsible spending and says we went to war in Iraq because of oil.

Like watching house full of children burn down and calling the fire department the next day.

It really really pisses me off that everyone in our gov't. is such a tool that they have to retire before acknowledging very simple truths.  

It also really really pisses me off that we've been saying these things for oh 7 years and we're labelled insane lefties, but when it turns our that, er, we're right, it's Greenspan who legitimizes our position.  Unbelievable.  

"Pretending that you already know the answer when you don't is not actually very helpful." ~Migeru.

by poemless on Mon Sep 17th, 2007 at 11:01:32 AM EST
Booman points out the problems with Bubble's story:
Iraq had, and has, almost no navy to speak of. It's access to the Persian Gulf is limited to a tiny slice of land in the disputed Shatt al-Arab, and the port city of Umm Qasr. Perhaps Saddam's invasion of Kuwait, had it been allowed to stand, would have enabled him, over time, to develop naval dominance of the Straits of Hormuz, but in 2002-3 that was about as likely as Ecuador seizing control of the Panama Canal. If Alan Greenspan thought there was any prospect of Saddam Hussein controlling the Straits of Hormuz then he is an idiot.

Straits of Hormuz????

by Colman (colman at eurotrib.com) on Mon Sep 17th, 2007 at 11:53:07 AM EST
[ Parent ]
The only way it could make sense is if he was talking of the first gulf war (iran-iraq, 1980-88) when Saddam's push into Iran territory effectively gave him direct access to more coast line. He was still pretty far off the straits, and to think he would then turn against his western supporters and block it is far-fetched.

Remaking history, what could have happened if he did cut Iran artillery from the straits coastline, is that the US would have engaged Iran openly, the moment an Arab proxy would have deprived the mollahs of their only "weapon of mass destruction" (a blocus). But we are entirely in a work of fiction here.

May be the whole timeline gets fuzzy in his heads, see it's over three decades and he's past 80 now...

Pierre

by Pierre on Mon Sep 17th, 2007 at 12:03:10 PM EST
[ Parent ]
If Saddam had ever managed to get control of the Straits of Hormuz or any other strategic oil interest and tried using them against us, he wouldn't have held them long. The entire damn US Navy and Marine Corps would have sent him packing all the way back to Shatt-al-Arab.

Hey, that happened once. Remember Desert Storm?

Peak oil is not an energy crisis. It is a liquid fuel crisis.

by Starvid on Mon Sep 17th, 2007 at 07:38:53 PM EST
[ Parent ]
If Alan Greenspan thought there was any prospect of Saddam Hussein controlling the Straits of Hormuz then he is an idiot.

Well, yes.

There's always that.

by ThatBritGuy (thatbritguy (at) googlemail.com) on Mon Sep 17th, 2007 at 12:44:01 PM EST
[ Parent ]
I know I mentioned this last night but Ian Welsh eviscerated Greenspan on FireDogLake last night.

You should read it in full but a few choice quotes below

Randians generally figure that any money you got, you got all on your own, and you therefore deserve all of it. The government is a leech for taking it away to give to less productive people, because rich people are generally the most productive contributors and should not be disincentivised from working hard. Tax cuts on the rich are a very Randian thing to do. And so Greenspan backed them ......................

Now, it's definitely true that the sub-prime mess and the housing bubble weren't just caused by Fed policy. But it's also true that those 3 years at generational lows certainly kick-started it, gestated and got it growing at a ferocious rate. I was writing about the coming housing bubble back in 2002 (on the old Atlantic Monthly forums) - it was clear what the policies would do. And Greenspan knew too - he implicitly admits it above with his talk about how wonderful more home ownership would be because it would help increase property rights by altering politics. Property rights, of course, are another Randian bugaboo. Not that they aren't important, but there's a reason why they aren't in the Constitution, why governments are allowed to seize property, and so on. Greenspan kept rates low longer than made sense due to ideological reasons. And he pushed it hard ......................

For him, now, to say that he somehow didn't mean it, or that he was, behind the scenes, urging caution, or that he was hoodwinked, is sophistry of the most pathetic kind. He was not economically naive. He had the skills not to be taken in. If he was taken in, he was taken in because he wanted to be taken in. And right up to 2004 he can be seen, having not learned his lesson, even as Bush had vetoed no spending bills at all, still using his reputation to try and help push through Bush administration policies.

There have been a lot of people writing books and articles of late, in which they throw Bush over the bus in an attempt to save their reputation. (Colin Powell, are you listening?) In almost every case, they did nothing when they had the power; had the influence; had the opportunity to actually made a difference.

Greenspan is nothing but another rat fleeing the sinking S.S. Bush in an attempt to save his reputation for posterity. He doesn't deserve space on the life raft. Men like Treasury Secretary O'Neill, who wrote their books while it still mattered, when it still took guts, when it might have made a difference; they deserve a hand up. Greenspan deserves to go down with the ship.



keep to the Fen Causeway
by Helen (lareinagal at yahoo dot co dot uk) on Mon Sep 17th, 2007 at 12:05:15 PM EST
considering how rarely jerome uses obscenities to communicate, i fins the occasions when they do emerge as apropos.

in this case even measured!

behold the face of a lickspittled toad, rich, old, and rightly reviled.

his turning a conveniently blind eye when his reputation could have enabled his word to have stopping power on this runaway doomtrain.

ditto powell, hear, hear.

he was their willing collaborator, and without attaching electrodes or firing a shot, has done as much to heap misery on the poor as bush/cheny, whose machine could not have done a hundredth of the domestic damage without the well-oiled cog of his financial policies.

why anyone would want to suffer through 500 pages from this old 'lying shit' is entirely beyond my wildest imagination.

it was bad enough seeing him pontificate these last years, pretending we were in the middle of the road, with three wheels off the cliff.

perfect reflection of the 'end times', when humans like this are given 8.5 mill to revise their personal histories, and lionised as sages...

false profits indeed.

'The history of public debt is full of irony. It rarely follows our ideas of order and justice.' Thomas Piketty

by melo (melometa4(at)gmail.com) on Tue Sep 18th, 2007 at 04:33:42 AM EST


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