Best of the Week
Most Popular
1. Gold vs Cash in a Financial Crisis - Richard_Mills
2.Current Stock Market Rally Similarities To 1999 - Chris_Vermeulen
3.America See You On The Dark Side Of The Moon - Part2 - James_Quinn
4.Stock Market Trend Forecast Outlook for 2020 - Nadeem_Walayat
5.Who Said Stock Market Traders and Investor are Emotional Right Now? - Chris_Vermeulen
6.Gold Upswing and Lessons from Gold Tops - P_Radomski_CFA
7.Economic Tribulation is Coming, and Here is Why - Michael_Pento
8.What to Expect in Our Next Recession/Depression? - Raymond_Matison
9.The Fed Celebrates While Americans Drown in Financial Despair - John_Mauldin
10.Hi-yo Silver Away! - Richard_Mills
Last 7 days
US Coronavirus Infections & Deaths Trend Trajectory - How Bad Will it Get? - 2nd Apr 20
Silver Looks Bearish Short to Medium Term - 2nd Apr 20
Mickey Fulp: 'Never Let a Good Crisis Go to Waste' - 2nd Apr 20
Stock Market Selloff Structure Explained – Fibonacci On Deck - 2nd Apr 20
COVID-19 FINANCIAL LOCKDOWN: Can PAYPAL Be Trusted to Handle US $1200 Stimulus Payments? - 2nd Apr 20
Day in the Life of Coronavirus LOCKDOWN - Sheffield, UK - 2nd Apr 20
UK Coronavirus Infections and Deaths Trend Trajectory - Deviation Against Forecast - 1st Apr 20
Huge Unemployment Is Coming. Will It Push Gold Prices Up? - 1st Apr 20
Gold Powerful 2008 Lessons That Apply Today - 1st Apr 20
US Coronavirus Infections and Deaths Projections Trend Forecast - Video - 1st Apr 20
From Global Virus Acceleration to Global Debt Explosion - 1st Apr 20
UK Supermarkets Coronavirus Panic Buying Before Lock Down - Tesco Empty Shelves - 1st Apr 20
Gold From a Failed Breakout to a Failed Breakdown - 1st Apr 20
P FOR PANDEMIC - 1st Apr 20
The Past Stock Market Week Was More Important Than You May Understand - 31st Mar 20
Coronavirus - No, You Do Not Hear the Fat Lady Warming Up - 31st Mar 20
Life, Religions, Business, Globalization & Information Technology In The Post-Corona Pandemics Age - 31st Mar 20
Three Charts Every Stock Market Trader and Investor Must See - 31st Mar 20
Coronavirus Stocks Bear Market Trend Forecast - Video - 31st Mar 20
Coronavirus Dow Stocks Bear Market Into End April 2020 Trend Forecast - 31st Mar 20
Is it better to have a loan or credit card debt when applying for a mortgage? - 31st Mar 20
US and UK Coronavirus Trend Trajectories vs Bear Market and AI Stocks Sector - 30th Mar 20
Are Gold and Silver Mirroring 1999 to 2011 Again? - 30th Mar 20
Stock Market Next Cycle Low 7th April - 30th Mar 20
United States Coronavirus Infections and Deaths Trend Forecasts Into End April 2020 - 29th Mar 20
Some Positives in a Virus Wracked World - 29th Mar 20
Expert Tips to Save on Your Business’s Office Supply Purchases - 29th Mar 20
An Investment in Life - 29th Mar 20
Sheffield Coronavirus Pandemic Infections and Deaths Forecast - 29th Mar 20
UK Coronavirus Infections and Deaths Projections Trend Forecast - Video - 28th Mar 20
The Great Coronavirus Depression - Things Are Going to Change. Here’s What We Should Do - 28th Mar 20
One of the Biggest Stock Market Short Covering Rallies in History May Be Imminent - 28th Mar 20
The Fed, the Coronavirus and Investing - 28th Mar 20
Women’s Fashion Trends in the UK this 2020 - 28th Mar 20
The Last Minsky Financial Snowflake Has Fallen – What Now? - 28th Mar 20
UK Coronavirus Infections and Deaths Projections Trend Forecast Into End April 2020 - 28th Mar 20
DJIA Coronavirus Stock Market Technical Trend Analysis - 27th Mar 20
US and UK Case Fatality Rate Forecast for End April 2020 - 27th Mar 20
US Stock Market Upswing Meets Employment Data - 27th Mar 20
Will the Fed Going Nuclear Help the Economy and Gold? - 27th Mar 20
What you need to know about the impact of inflation - 27th Mar 20
CoronaVirus Herd Immunity, Flattening the Curve and Case Fatality Rate Analysis - 27th Mar 20
NHS Hospitals Before Coronavirus Tsunami Hits (Sheffield), STAY INDOORS FINAL WARNING! - 27th Mar 20
CoronaVirus Curve, Stock Market Crash, and Mortgage Massacre - 27th Mar 20
Finding an Expert Car Accident Lawyer - 27th Mar 20
We Are Facing a Depression, Not a Recession - 26th Mar 20
US Housing Real Estate Market Concern - 26th Mar 20
Covid-19 Pandemic Affecting Bitcoin - 26th Mar 20
Italy Coronavirus Case Fataility Rate and Infections Trend Analysis - 26th Mar 20
Why Is Online Gambling Becoming More Popular? - 26th Mar 20
Dark Pools of Capital Profiting from Coronavirus Stock Markets CRASH! - 26th Mar 20
CoronaVirus Herd Immunity and Flattening the Curve - 25th Mar 20
Coronavirus Lesson #1 for Investors: Beware Predictions of Stock Market Bottoms - 25th Mar 20
CoronaVirus Stock Market Trend Implications - 25th Mar 20
Pandemonium in Precious Metals Market as Fear Gives Way to Command Economy - 25th Mar 20
Pandemics and Gold - 25th Mar 20
UK Coronavirus Hotspots - Cities with Highest Risks of Getting Infected - 25th Mar 20
WARNING US Coronavirus Infections and Deaths Going Ballistic! - 24th Mar 20
Coronavirus Crisis - Weeks Where Decades Happen - 24th Mar 20
Industry Trends: Online Casinos & Online Slots Game Market Analysis - 24th Mar 20
Five Amazingly High-Tech Products Just on the Market that You Should Check Out - 24th Mar 20
UK Coronavirus WARNING - Infections Trend Trajectory Worse than Italy - 24th Mar 20
Rick Rule: 'A Different Phrase for Stocks Bear Market Is Sale' - 24th Mar 20
Stock Market Minor Cycle Bounce - 24th Mar 20
Gold’s century - While stocks dominated headlines, gold quietly performed - 24th Mar 20
Big Tech Is Now On The Offensive Against The Coronavirus - 24th Mar 20
Socialism at Its Finest after Fed’s Bazooka Fails - 24th Mar 20
Dark Pools of Capital Profiting from Coronavirus Stock and Financial Markets CRASH! - 23rd Mar 20
Will Trump’s Free Cash Help the Economy and Gold Market? - 23rd Mar 20
Coronavirus Clarifies Priorities - 23rd Mar 20
Could the Coronavirus Cause the Next ‘Arab Spring’? - 23rd Mar 20
Concerned About The US Real Estate Market? Us Too! - 23rd Mar 20
Gold Stocks Peak Bleak? - 22nd Mar 20
UK Supermarkets Coronavirus Panic Buying, Empty Tesco Shelves, Stock Piling, Hoarding Preppers - 22nd Mar 20
US Coronavirus Infections and Deaths Going Ballistic as Government Start to Ramp Up Testing - 21st Mar 20
Your Investment Portfolio for the Next Decade—Fix It with the “Anti-Stock” - 21st Mar 20
CORONA HOAX: This Is Almost Completely Contrived and Here’s Proof - 21st Mar 20
Gold-Silver Ratio Tops 100; Silver Headed For Sub-$10 - 21st Mar 20
Coronavirus - Don’t Ask, Don’t Test - 21st Mar 20
Napag and Napag Trading Best Petroleum & Crude Oil Company - 21st Mar 20
UK Coronavirus Infections Trend Trajectory Worse than Italy - Government PANICs! Sterling Crashes! - 20th Mar 20
UK Critical Care Nurse Cries at Empty SuperMarket Shelves, Coronavirus Panic Buying Stockpiling - 20th Mar 20
Coronavirus Is Not an Emergency. It’s a War - 20th Mar 20
Why You Should Invest in the $5 Gold Coin - 20th Mar 20
Four Key Stock Market Questions To This Coronavirus Crisis Everyone is Asking - 20th Mar 20
Gold to Silver Ratio’s Breakout – Like a Hot Knife Through Butter - 20th Mar 20
The Coronavirus Contraction - Only Cooperation Can Defeat Impending Global Crisis - 20th Mar 20
Is This What Peak Market Fear Looks Like? - 20th Mar 20
Alessandro De Dorides - Business Consultant - 20th Mar 20
Why a Second Depression is Possible but Not Likely - 20th Mar 20

Market Oracle FREE Newsletter

Coronavirus-bear-market-2020-analysis

Greenspan's Incessant Contradictory Ramblings

Economics / Liquidity Bubble May 27, 2008 - 08:04 AM GMT

By: Brady_Willett

Economics Best Financial Markets Analysis ArticleIn yet another attempt to defend his legacy, Greenspan resorts to semantics and outrageous contradiction ( FT Article ). On the topic of asset ‘bubbles' – which Greenspan preferred to completely ignore as they acquired air and help reflate after they burst – he asked the following:

“Is there a bubble today in food, energy, gold, currencies?  If so, what specifically should we do about it?”


With all due respect Mr. Greenspan, the more appropriate question is whether or not Fed policies play a role in determining today's food, energy, gold and currency prices.  The answer to this question is, of course, yes – when you combine many years of easy/reckless money policies with regulatory neglect you encourage speculation not only in stocks and real estate (as seen during Greenspan's tenure) but also commodities and currencies. Distill a degree of control at the Fed and the financial markets would surely trade less wildly out of control.

This is not to avoid Greenspan's question. After all, it is easy to play along:

In order to combat the ‘bubble' in commodity prices, if indeed there is one, you force the CFTC to produce completely transparent COT information on a daily basis, you immediately stop pension funds from investing in commodities, you close the ‘swaps loophole' and/or force all speculators to face position limits (See Masters, PDF ), and you trot Bernanke and every other major central bank out once a day to explain that commodity prices do not reflect the fundamentals.  Within a week the commodities bubble, if indeed there is one, would be busted.

Next, in order to combat the bubble in ‘currencies' (perhaps Greenspan should specify exactly which currency he means – wink, wink), you abolish the Federal Reserve.  Failing this seemingly extreme measure, you reinstate Volcker as Fed boss and within an hour the currency markets are dealt a deathblow of calm because the dollar bottom is in…

These are some basic ideas to counteract the bubbles Greenspan asks about. Surely there are many more.  Incidentally, what didn't come to mind when Greenspan asked the above question is ‘keep the printing pressing going full tilt, do absolutely nothing on any regulatory level, and cut interest rates like a madman when you hear a pop.'

After his regular bubble fare, Greenspan turned to discussing the credit crisis with the following:

Mr Greenspan said the most sensible thing to do was “to increase the capacity of our financial institutions to absorb shocks in general. That means more capital”.

He said the market was already demanding higher capital on the part of financial institutions in the wake of the crisis. Regulators should allow this market-led process to run its course before deciding to what extent to raise regulatory capital.

But it would in principle make sense to vary the amount of regulatory capital that banks needed to hold at different stages of the economic cycle, he said.


“I have always been in favour of counter-cyclical capital requirements,” Mr Greenspan said. “There are virtually no bad loans made at the bottom of the cycle. The bad loans are all made at the top.”

Mr. Greenspan, am I reading your words correctly?  Are you suggesting that regulators should alter bank capital requirements at different stages of the economic cycle? Did you really say “I have always been in favour of counter-cyclical capital requirements'???  Seriously, are my eyes deceiving me? 

In case whatever medication Greenspan is on hinders him from comprehending written text, please find someone to scream this into his best ear: RAISING RESERVE/CAPITAL REQUIREMENTS IS EXACTLY WHAT YOU SHOULD HAVE DONE AS THE SUBPRIME MANIA TOOK ROOT!!!

(Incidentally, as anyone paying attention will have no doubt surmised, Greenspan answered his own question about bubbles with ‘counter-cyclical' regulatory measures).

Every Sentence A Fascinating Contradiction

Mr. Greenspan now believes that counter-cyclical efforts should be undertaken by regulators because, as we all know, bad loans are made during the best of times. However, Greenspan apparently also still believes that regulators should keep their grimy paws away from any form of regulation and that it is impossible to accurately recognize anything resembling a ‘top' (or ‘bubble' nowadays).

For the record, Greenspan cut reserve requirements on banks twice during his tenure (December 1990 and April 1992), and he never raised banking reserve requirements or margin rates. He also failed to adopt any regulatory pressure to try and counter one of the biggest housing manias in U.S. history, even though his peers warned of widespread fraudulent lending practices and housing prices were being bid up to insane levels with the help of many blatant ‘bad loans'. And still the confusion gets worse:

On the regulatory side, “I have no doubt that we can very effectively quash a bubble,” he [Greenspan] said. It was a question of the costs involved. “What price do you pay in terms of suppressed economic activity?”

But Mr. Greenspan, I thought bubbles were only identifiable after they burst?  How do you ‘very effectively quash' what can not be seen? Have you been lying to us all these years or is this just another of your many innocent contradictions?  Last but probably not the last we hear from him:

The former Fed chief said he would be “fully supportive” of “leaning against the wind” with interest rates when asset prices are rising rapidly if someone could provide a credible framework for doing so. But he said: “I have just not seen any evidence that it is feasible.”

Is the man whose policies, or lack thereof, have helped push the U.S. financial markets to the edge of destruction really going down the ‘evidence' and ‘feasible' path?  What, Sir Alan, feasibility study were you adhering to when you allowed financial players to take the Fed hostage and put the entire financial system at risk?  What ‘evidence', dear sir, did you draw upon to conclude that all financial market history needed to be erased because of your twisted desire to see the markets self regulate (was not the Fed brought to life because of the supposedly dire need to more efficiently regulate money?)

In short, rather than incessantly romanticize about a dreamy anti-bubble handbook we all know doesn't exist, why doesn't Greenspan be honest and admit that he messed up?  However hard he tries, Greenspan is not going to convince anyone that his tenure as Fed boss is to be adored by future generations like a Picasso.  Rather, the appropriate portrait is that of a lazy regulator that loved to throw a party, and whose cantankerous contradictions after leaving the Fed dumbfounded all.

By Brady Willett
FallStreet.com

FallStreet.com was launched in January of 2000 with the mandate of providing an alternative opinion on the U.S. equity markets.  In the context of an uncritical herd euphoria that characterizes the mainstream media, Fallstreet strives to provide investors with the information they need to make informed investment decisions. To that end, we provide a clearinghouse for bearish and value-oriented investment information, independent research, and an investment newsletter containing specific company selections.

Brady Willett Archive

© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Comments

George
29 May 08, 11:09
Greenspan

And he's ugly too !


Ron Holland
03 Jun 08, 20:23
Abolish the US FED

The Federal Reserve is part of the problem not the solution!

Sign and forward our Abolish the Federal Reserve Petition at

http://www.petitiononline.com/fed/petition.html to all your pro-freedom friends and associates. The collapsing dollar, falling housing market, the subprime mortgage and growing credit crisis and stock market weakness are all a result of earlier Federal Reserve actions designed to maximize Wall Street and banking profits at the expense of productive, working Americans.

Ron Holland, The Swiss Confederation Institute, Wolf Laurel, NC

PS Check out the July Las Vegas FreedomFest Conference www.freedomfest.com


Ron
09 Jun 08, 21:10
Time to Abolish the Fed

The Federal Reserve Has Created the Risk of a Global Depression!

Please sign, publish or forward our Abolish the Federal Reserve Petition at

http://www.petitiononline.com/fed/petition.html to all your pro-freedom friends and associates.

The collapsing dollar, exploding oil and food prices, falling housing market, the subprime mortgage and growing credit crisis and stock market weakness are all a result of earlier Federal Reserve actions designed to maximize Wall Street and banking profits at the expense of productive, working people around the world.

Ron Holland, The Swiss Confederation Institute, Wolf Laurel, NC

PS Check out the July Las Vegas FreedomFest Conference www.freedomfest.com


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

6 Critical Money Making Rules