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Friday, September 16, 2016

In His Own Words: From Maestro To Mea Culpa

For some reason Alan Greenspan’s opinions are still taken seriously. No one single person has done more to damage the economic long run that his Keynesian training told him would never matter. We are living in that increasingly desolate long run, and yet somehow to the media to some nontrivial extent beyond it he has maintained credibility. What is most offensive is that he now acknowledges the economic despondency but only as if it was just mere circumstance or accident.
In a Bloomberg article today, the former Fed Chairman is quoted to be worried about the “crazies.”
Former Federal Reserve Chairman Alan Greenspan voiced concern that the U.S. economic and political system could be undermined by what he called “crazies.”

“It is the worst economic and political environment that I’ve ever been remotely related to,” Greenspan, 90, told a conference in Washington Tuesday evening sponsored by Stanford University and the University of Chicago.
This is no mere accident, however, as there is a direct line from his “stewardship” to the increasingly worrisome possibilities that become more probable the longer this depression continues on. Historically speaking, lengthy periods of stagnation do not spontaneously turn into rapid and healing growth all of a sudden, nor do elite policymakers suddenly figure it all out. In almost every prior instance, catastrophe of some degree forces a reckoning and only then are solutions presented and executed; human nature is apathy until that point but immediately turns action once it is reached.
In terms of monetary policy, Greenspan long ago recognized that there wasn’t any anywhere in the world. As early as 1996 in his infamous “irrational exuberance” speech, there was the “maestro” admitting that the very concept of money had long ago gotten away from central banking.

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