greenspam* says it’s the worse economy he’s ever seen. i don’t believe it. i never believed him before, why should i now?..i think the opposite is true. there’s going to be a class war (the poor vs the poor) and lots of opportunities to make money. call me irrationally exuberant.
and rove accusing the mccain camp of running overly negative ads about obama..is he trying to distance himself from mccain? i always thought johnny was some kind of gop patsy. tell them your tale about being in that jail, johnny..he’s an opening act, an hors d’oeuvre.
last night i watched hotel rwanda. i guess the smart money is already stockpiling chinese-made machetes. i don’t think i have the stomach to become an arms (legs?) dealer. people will need rice. rice is nice. btw where is condi?
*excerpt from aug 4 2008 bbc story on the credit crunch..
William Fleckenstein is the author of Greenspan’s Bubbles: The Age of Ignorance at the Federal Reserve. He also manages a hedge fund based in Seattle. In his latest book, the billionaire investor George Soros makes the case that we are witnessing the end of a 25-year super-bubble.
I certainly agree with his observation and would just note that the time-frame of this super-bubble roughly approximates to the career of Alan Greenspan, who, in my opinion, is responsible for its creation. It was Alan Greenspan, as chairman of the Federal Reserve, who decided that central banks like his should not try to dampen down the sort of speculation that leads to bubbles in the first place.
To do that might have slowed economic activity, an unacceptable possible outcome.
But then, when the speculative bubble collapsed, after the prices of things like companies no longer represented anything remotely resembling their underlying value, Alan Greenspan just bailed out the financial system. What began as small bail-outs became big bail-outs, from the year 2000 onwards. Interest rates were taken to the absurdly low level of 1% and held there far too long.
That engendered a housing bubble, which was nourished by the complete abdication of lending standards in the banking system. Securitisation – swapping hoped-for future cashflow for large amounts of cash now – was spearheaded and championed by Alan Greenspan himself.
Deregulation was thought to be the solution to any and all imbalances, as the market would find any weak institutions and punish them for bad decisions before the whole system became rotten.
The truly sad part is that this outcome was completely foreseeable. It was possible to anticipate a catastrophe of such dimensions, even as the housing boom was still in full swing.
Unfortunately, the very institution that had the regulatory authority to supervise the banking system was the one leading the cheerleading – namely, the Fed, in the form of Alan Greenspan.
In the end, it was sort of like putting the bartender in charge of the breathalyser.