Greenspan's reputation in 20 yrs

[artplumber]

Whaddya think?

[KFC911]

I don't have to wait 20 years to form an opinion...

[legion]

I voted "made a few mistakes, but generally good".

That's not to say that I'm a cheerleader for him. His biggest mistake is clearly failing to spot the subprime mess that was building under his tenure. The problem is, having never seen something like that before, how do you recognize it?

[hardflex]

you forgot to add

Will be the scapegoat for Investment Bankers, Political Parties, and Politicians.

[Porsche-O-Phile]

Originally Posted by legion

I voted "made a few mistakes, but generally good".

That's not to say that I'm a cheerleader for him. His biggest mistake is clearly failing to spot the subprime mess that was building under his tenure. The problem is, having never seen something like that before, how do you recognize it?

Same way everyone else recognized it. Most of us did. I know I certainly did, and I'm no economist. I was saying as early as 2003 that this was a ridiculous and unsustainable event and was going to end very badly with dire consequences for those involved. It wasn't all that dissimilar from the "dot-com" bubble only a few years earlier.

I honestly think Greenspan knew what was going on but was either politically pressured or directly ordered by the W.H. to play the role of the Propaganda Minister. Remember, GWB was getting hammered over job losses and the overall state of the economy as recently as 2001/2002. There has been a lot of pressure on his administration to sweep problems under the rug until he's out of office and pass them on to the next administration. I think Greenspan was simply "buying time" for the Bush administration this way. I honestly do.

After the recession following September 11, 2001, the rates were slashed in order to stimulate the economy. I remember that period vividly - the ONLY thing buoying up the economy then was real estate speculation being driven SOLELY by the low rates. Eventually things heated up (quickly) out of control and the genie was out of the bottle. Unless Greenspan had quickly raised rates a LOT (and he'd have been hugely unpopular for doing so), the economy was going to overheat at that point. Once the housing mess started, it began to spill into other sectors and sales went up, spending went through the roof, etc. This is undoubtedly what the administration wanted (versus a recession) but it was way too much, too fast and it got out of control.

Greenspan (IMHO) lost all his credibility when he denied the existence of the housing bubble. Sorry, but a 100%+ increase in prices over 3 years in some markets is NOT normal under any circumstance where average annual growth is on the order of 3% for the last 120 years. But I also think it was more of a case of him being a casualty of political manipulation than being overtly stupid. Kind of like Colin Powell being pressured into standing in front of the U.N. and swearing (on his own credibility) that Iraq had WMDs and the U.S. had undeniable evidence of it. Too bad for him (or Greenspan), good for the administration in the short term.

Sorry to politicize this - not my intention, but this is honestly my assessment.

[legion]

Jeff, I don't think you realize just how politically independent the Fed is. There is NOTHING the White House (or Congress for that matter) can do to put pressure on the Fed to behave in any specific way. They can't fire any of the governors or the chairman, they can't take away funding. They have no power over the fed--and this is by design. It is for this reason I think your theory is dead wrong.

You were looking at the RE boom from the bottom up. You knew what houses cost because you were looking to buy. Greenspan was looking from the top down. He got reports with lots of numbers and probably wasn't paying attention to the fact that a 22 year old waitress bought the mansion next to his. It's a lot harder to spot the things we did from reports.

[tabs]

One underestimates the effect of 911 on the economy. As Legion says it took a cheap money environment to pump liquidity into the system so that it would not fail. Maybe Legion should rethink and reestimate the effect of 911, as the reason to keep interest rates low for so long. Or perhaps it was a gamble to ramp up the economy so that tax revenues would offset the deficit spending by the government in the war on terrorism. Anyway one wnats to cut it, we go back to 911.

[tabs]

Greenspan has his money invested in US Treasurys.

[Rick Lee]

Does anyone remember Greenspan's predecessor? Was it Paul Volcker? I doubt Greenspan will be remembered any more than any other Fed Chair.

[hardflex]

Greenspan took over from Paul Volker in 1987 and served till 2005, so he was around during the S&L failures of the 80's. Anyone who remembers Volcker's tight money to rein in inflation?

[VaSteve]

Originally Posted by Rick Lee

Does anyone remember Greenspan's predecessor? Was it Paul Volcker? I doubt Greenspan will be remembered any more than any other Fed Chair.

No, for some reason people seemed to have Greenspan in the news all the time. In the boom years, it was like a lust. Who's the current Fed Chairman? I have no idea.


Edit: ooh yeah, Bernake. ops: