Never let it be said The Speculator only hits a man when he’s down. We were quite fond of lashing out at Fed Reserve Chairman Alan Greenspan when he was basking in can-do-no-wrong glory. So there’s no question of conscience involved in putting him back in the stocks now.
This past September, in fact, he became Sir Alan, joining Jack Welch as an honorary knight at the hands of QEII – the monarch, that is, not the boat. I wondered where he’d been, since Greenspan was discernibly less prominent during the last tempest-tossed year of the US economy. I speculated that he knew those uncritical commentators who gave him credit for the expansion of the economy and the distention of the market balloon would logically consider him equally responsible for the current low water marks.
But it is notoriously difficult to keep an inflated ego from rising, and come September there he was again in Congress, pontificating as if the pensions and savings of millions of Americans hadn’t gone down the tubes on his watch. He spoke in the usual cryptic mode. Even his best friends describe his circumlocutions as opaque, soporific and muddled.
This is not some form of verbal dyslexia but a conscious effort. As Greenspan said in 1995, ‘I spend a substantial amount of my time endeavoring to fend off questions, and worry terribly that I might end up being too clear.’ Not to worry, Alan. With his customary prophetic ambiguity, he told Congress that the budget deficit is a bad thing but the tax cuts for the rich that precipitated it (and are going to make it worse) are good and irreversible. Go extrapolate.
In a rare moment of lucidity back in 1996, Greenspan referred to the stock market bubble as ‘irrational exuberance’. As it neared its end, he said that someone looking back from 2010 could conclude that ‘the American economy was experiencing a once-in-a-century acceleration of innovation which propelled forward productivity, output, corporate profits and stock prices at a pace not seen in generations before, if ever.’ As always, Greenspan’s statement was accompanied by an ‘or’ as he went on to say: ‘Alternatively they could think that a good deal of what we are currently experiencing was just one of the many euphoric speculative bubbles that have dotted human history.’
You could make excuses for him. You could say that the bubble and its collapse simply meant that paper gains became paper losses. But we know that’s not the way the market works. The type of cronyism that Enron, Tyco and the rest typified meant that the gains went to the insiders who sold out early, while the dead dot-coms spattered the portfolios, mutual funds and pension schemes of retail investors. Like the tax cut Greenspan applauded, the bubble market was a transfer of even more wealth to the already wealthy – particularly merchant bankers and senior management.
I’ve searched in vain for any sign that Greenspan accepted any serious responsibility for the resulting slow crash. After all, despite calls to do so, he resolutely refused to raise the margin requirements that would have dampened down the speculation in the markets while he cheered on the captains of industry who were looting shareholders, employees and retirees alike. He called for social security funds to be entrusted to the same robber barons and bubble markets.
His phobic fear of inflation kept him stifling real economic growth while the bubble economy ballooned. But he could never explain why stock options by the billion for CEOs had no such inflationary effect while a couple of dimes on the minimum wage would. Instead he told the Senate that his preference for the minimum wage ‘would be to lower it and, in fact, eliminate it because I think that it does more damage than good.’
In contrast, when Long Term Capital Management went end-up and lost untold billions of leveraged money in derivatives trading, there was white knight Sir Alan Greenspan riding to the rescue. He has done this stuff before. He is often credited with the quick recovery from the 1987 crash. In fact it was he and the Fed that caused it.
We should never forget that the chairman of the Federal Reserve was one of the closest disciples of Ayn Rand, whose longest work, Atlas Shrugged, is a hymn of hate to FDR and his New Deal which put America back to work after the Depression and laid the foundations for the unprecedented growth and prosperity of the United States of the 1950s and 1960s.
If this recession really bites, pray that Greenspan is not in charge. It was dinosaur-brained economics like his that gave us the crash and the Depression. It was errant knights like him, chasing the Holy Grail of the gold standard that helped prepare the world for war. So arise Sir Alan. Do the chivalrous thing. Take the rap for the present debacle and resign.
The Speculator
