Saturday, August 11, 2007

The Donkey Gets His Tail

Big Picture quotes Al Abelson, who names the name.

...we couldn't help but think of the acute discomfort being felt by that outstanding public servant Alan Greenspan, who, during his celebrated tenure as head of the Federal Reserve, more than anyone deserves credit for nurturing the ownership society. Mr. Greenspan, lest we forget, went far beyond the call to entice people, no matter what their circumstances, into buying a home by whacking the cost of credit to as near zero as you can get and still lay claim to being somewhat rational, and urging them to go for those new-fangled adjustable mortgages with deceptively low initial interest rates.

Beyond even his cleverness at blowing successive "smart bubbles," so that the newest one (for example, housing) was nicely calculated to offset the fallout from its burst predecessor (the stock market), and his adroit ability to please his political masters (his overriding passion has always been to be liked), nothing more distinguished Mr. Greenspan's long stint at the Fed than his timing in departing from that august body.

As his successor, gentle Ben Bernanke, is no doubt becoming ruefully aware, creating a mess is easy. The trick is in knowing when to slip out, leaving someone else with the job of cleaning it up. And here Mr. G has proved himself an undisputed master.

Financial mischief on such a grand scale is not a one-man job, and Mr. Greenspan, needless to say, had a lot of help from Wall Street, Washington and points north, south and west. But there's no diminishing the singular part he played.

And just as the contempt for risk that made possible the gross extravagances in housing and the financial markets was sustained by confidence that Mr. G would always bail out the participants -- the so-called Greenspan put -- so the current collapse in housing and the financial markets merits a special designation, one that similarly recognizes his critical role. How about the Greenspan Kaput?"

It remains to be seen just how much trouble "Easy Al" has actually caused. But the indicators are there to be read--look, e.g., at the relative value of the USD to other currencies (Euro, Yen) or the relative value of the USD to "real" stuff like petroleum, steel, and copper.

Oscar Wilde's aphorism defines the cynics. They reside on Wall Street and at the Fed.

2 comments:

St. Jimbob of the Apokalypse said...

Of course, we cannot blame people who overestimated their financial resources or left themselves no room for skyrocketing fuel costs. Maybe Americans will reel in their spending a bit?

Dad29 said...

There's plenty of blame to spread around. But Greenspan's always pandered to the Large Money interests and then always acted surprised (yah, right) when the SHTF.