Alan Greenspan, Progenitor of the 2008 Economic Crash: “I Don’t Apologize.”

Alan Greenspan was the chairman of the Federal Reserve from 1987 to 2006. I will remind my less economically-inclined readers that the Federal Reserve is the institution in America that prints money. After Greenspan handed over the chairmanship to Ben Bernanke in 2006, he seemed to disappear for a great many years… until now.

Mr. Greenspan has recently penned a book, “The Map and the Territory”, which purports to explore and explain the recent financial troubles seen in America while also teaching readers the Greenspan methods of economic forecasting. He has reappeared in the public eye to promote his book, and seemingly also to attempt repairing his legacy diminished by the 2008 financial crash.

In a recent interview on CNBC, Greenspan had this to say in his own defense:

“I am in the business where, Harry Truman once said, ‘If you can’t stand the heat, get out of the kitchen’… I apologize for something I did wrong, and I do apologize. I don’t apologize…I was doing the best I can.

 The arguments, some of which are quite accurate is I missed certain forecasts, you don’t apologize for that. Do you? I don’t. We are not omniscient. I am a human being. I cannot see beyond the horizon any more than anyone else can.

 Now to apologize for not being Superman, I just refuse to do that because that never entered my mind.”

Alan Greenspan had more than just a little to do with setting the stage for the crash of 2008. During the post-9/11 recession, Greenspan decided that instead of allowing the recession to run its course and end in a few years, he wanted to attempt combating the recession (which eases short-term burdens, but always produces far more negative long-term impacts, as we are seeing now). He used the money-creating power of the Federal Reserve to inject large amounts of artificial credit into the banking system, which had the desired effect of holding down short-term interest rates. This practice is what generated the housing boom. Upon Bernanke’s ascension to the chairmanship he attempted to tighten monetary policy, and this caused short-term interest rates to skyrocket, which produced the collapse. I dislike Bernanke, but do not blame him for the crash of 2008; it was all due to the preceding 20 years of Greenspan.

Greenspan is a poor economist. He says he did not see the recession of 2008 coming, but there were economists who did (especially Austrians). He says that he had not taken fear of the recession into consideration.

As Greenspan opines during this CBS interview:

“It became very apparent to me that we misunderstand how systematic fear is,” [Greenspan] said.

The fear that led to panic selling and the euphoria that inflated the housing bubble were not factored into the Federal Reserve’s computer models.

Greenspan himself believed irrational behavior could not be projected or analyzed.

Now, he says, “I was wrong.”

“You think you can put human behavior in a model or in an equation?” Mason asked.

“In fact, you can measure it,” Greenspan replied. “Because if you look at the business cycle, for example, euphoria drives it about, and then fear collapses it. And you can take one example after the other, and they look alike.”

To begin with, I don’t see how anyone who claims to be an economist can underestimate fear in a recession. When it comes to recessions, almost the ONLY thing to count on is systemic fear.

At any rate, fear is not the problem. The market did not crash because of fear. Fear was merely a symptom of the actual problem: monetary expansion by the Federal Reserve. Greenspan’s monetary expansion fueled the boom that led to the bust. Greenspan does not want to admit this. That is why he blames anything and everything else that he can, such as the famous “Asian savers”.

Alan Greenspan was a buffoon. Ben Bernanke is a buffoon. Soon-to-be Federal Reserve Chairwoman Janet Yellen will be a buffoon. We are surrounded by a cavalcade of buffoons who are given control over important aspects of our lives, such as how we allocate and save money. The misdeeds perpetrated by these buffoons have a very real effect on our lives. My favorite economist, Murray Rothbard, once posed this nugget of wisdom in regards to the American economy, the Federal Reserve, and the position of Fed Chairman: It’s too bad that people aren’t more suspicious: that they don’t ask what’s wrong with an economy, or a dollar, that supposedly depends on the existence of one man.”

I say, to heck with the buffoons. End the Fed.

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