http://biz.yahoo.com/ap/070907/greenspan_remarks.html?.v=2
Report: Greenspan Says Turmoil Like '98
Friday September 7, 12:03 am ET
Report: Former Federal Reserve Chairman Alan Greenspan Says Market Turmoil Like 1998, 1987
NEW YORK (AP) -- "The human race has never found a way to confront bubbles," former Federal Reserve Chairman Alan Greenspan said Thursday in reference to the euphoria that can precede contractions, or reactions, like the current market turmoil, according to a published report.
Greenspan, speaking to economists in Washington, D.C., compared the turmoil to that of 1987 and in 1998, when the giant hedge fund Long-Term Capital Management nearly collapsed, The Wall Street Journal reported on its Web site. "The behavior in what we are observing in the last seven weeks is identical in many respects to what we saw in 1998, what we saw in the stock-market crash of 1987, I suspect what we saw in the land-boom collapse of 1837 and certainly the bank panic of 3/8 1907," Greenspan said at the event organized by the Brookings Papers on Economic Activity, according to the Journal.
Greenspan, now a private consultant, said euphoria takes over when the economy is expanding and leads to bubbles, "and these bubbles cannot be defused until the fever breaks," the Journal said. Bubbles can't be defused through incremental adjustments in interest rates, he suggested, the paper reported. The Fed doubled interest rates in 1994-95, and "stopped the nascent stock-market boom," but when stopped, stocks took off again. "We tried to do it again in 1997," when the Fed raised rates a quarter of a percentage point, and "the same phenomenon occurred."
Replies
57
Beach Fanatic
Greenspan also said the following in 2004:
Greenspan says ARMs might be better deal
By Sue Kirchhoff and Barbara Hagenbaugh, USA TODAY
WASHINGTON ? Federal Reserve Chairman Alan Greenspan said Monday that Americans' preference for long-term, fixed-rate mortgages means many are paying more than necessary for their homes and suggested consumers would benefit if lenders offered more alternatives.
In a standing-room-only speech to the Credit Union National Association meeting here, Greenspan also said U.S. household finances appeared generally sound, despite rising debt levels and bankruptcy filings. Low interest rates and surging home prices have given consumers flexibility to manage debt, he said.
"Overall, the household sector seems to be in good shape," Greenspan said.
Americans have been buying homes and refinancing mortgages at a record pace in the past several years, lured by low interest rates. Most mortgages are fixed rate, so consumers can prepay when rates go down but do not face higher costs if rates rise. Under adjustable-rate mortgages (ARMs), which made up about 28% of mortgages in January, borrowers usually have lower initial rates but face the risk of higher payments if rates in the broader economy rise.
While borrowers can refinance fixed-rate mortgages, Greenspan said homeowners were paying as much as 0.5 to 1.2 percentage points for that right and the protection against a potential rate rise, which could increase annual after-tax payments by several thousand dollars.
He said a Fed study suggested many homeowners could have saved tens of thousands of dollars in the last decade if they had ARMs. Those savings would not have been realized, however, had interest rates shot up.
"American consumers might benefit if lenders provided greater mortgage product alternatives to the traditional fixed-rate mortgage," Greenspan said.
Joseph McKenzie, deputy chief economist at the Federal Housing Finance Board, says buyers like the stability of fixed-rate mortgages, but there is increasing flexibility in products. "There are lots of innovative programs, especially targeting low-income and first-time buyers," he says.
The Mortgage Bankers Association said the average rate for a 30-year fixed mortgage in the week ended Feb. 13 was 5.46%, compared with 3.27% for a one-year ARM. Mark Zandi of Economy.com says that although Greenspan is technically correct, for some borrowers, including those with high debt, fixed-rate mortgages may be a better bet.
My favorite quotes from the above:
"Overall, the household sector seems to be in good shape," Greenspan said.
"There are lots of innovative programs, especially targeting low-income and first-time buyers," {Joseph McKenzie, deputy chief economist at the Federal Housing Finance Board}
Greenspan says ARMs might be better deal
By Sue Kirchhoff and Barbara Hagenbaugh, USA TODAY
WASHINGTON ? Federal Reserve Chairman Alan Greenspan said Monday that Americans' preference for long-term, fixed-rate mortgages means many are paying more than necessary for their homes and suggested consumers would benefit if lenders offered more alternatives.
In a standing-room-only speech to the Credit Union National Association meeting here, Greenspan also said U.S. household finances appeared generally sound, despite rising debt levels and bankruptcy filings. Low interest rates and surging home prices have given consumers flexibility to manage debt, he said.
"Overall, the household sector seems to be in good shape," Greenspan said.
Americans have been buying homes and refinancing mortgages at a record pace in the past several years, lured by low interest rates. Most mortgages are fixed rate, so consumers can prepay when rates go down but do not face higher costs if rates rise. Under adjustable-rate mortgages (ARMs), which made up about 28% of mortgages in January, borrowers usually have lower initial rates but face the risk of higher payments if rates in the broader economy rise.
While borrowers can refinance fixed-rate mortgages, Greenspan said homeowners were paying as much as 0.5 to 1.2 percentage points for that right and the protection against a potential rate rise, which could increase annual after-tax payments by several thousand dollars.
He said a Fed study suggested many homeowners could have saved tens of thousands of dollars in the last decade if they had ARMs. Those savings would not have been realized, however, had interest rates shot up.
"American consumers might benefit if lenders provided greater mortgage product alternatives to the traditional fixed-rate mortgage," Greenspan said.
Joseph McKenzie, deputy chief economist at the Federal Housing Finance Board, says buyers like the stability of fixed-rate mortgages, but there is increasing flexibility in products. "There are lots of innovative programs, especially targeting low-income and first-time buyers," he says.
The Mortgage Bankers Association said the average rate for a 30-year fixed mortgage in the week ended Feb. 13 was 5.46%, compared with 3.27% for a one-year ARM. Mark Zandi of Economy.com says that although Greenspan is technically correct, for some borrowers, including those with high debt, fixed-rate mortgages may be a better bet.
My favorite quotes from the above:
"Overall, the household sector seems to be in good shape," Greenspan said.
"There are lots of innovative programs, especially targeting low-income and first-time buyers," {Joseph McKenzie, deputy chief economist at the Federal Housing Finance Board}
SoWal Insider
Greenspan loves to toy with the American people's need for greed.
"This vast increase in the market value of asset claims is in part the indirect result of investors accepting lower compensation for risk. Such an increase in market value is too often viewed by market participants as structural and permanent... But what they perceive as newly abundant liquidity can readily disappear. Any onset of increased investor caution elevates risk premiums and, as a consequence, lowers asset values and promotes the liquidation of the debt that supported higher asset prices. This is the reason that history has not dealt kindly with the aftermath of protracted periods of low-risk premiums."
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"This vast increase in the market value of asset claims is in part the indirect result of investors accepting lower compensation for risk. Such an increase in market value is too often viewed by market participants as structural and permanent... But what they perceive as newly abundant liquidity can readily disappear. Any onset of increased investor caution elevates risk premiums and, as a consequence, lowers asset values and promotes the liquidation of the debt that supported higher asset prices. This is the reason that history has not dealt kindly with the aftermath of protracted periods of low-risk premiums."
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Edited
SoWal Insider
Greenspan, for all of his sins, did not directly advocate subprime lending. 5/1s taken around 4 percent spring '04 are still looking good.
SoWal Insider
Greenspan, for all of his sins, did not directly advocate subprime lending. 5/1s taken around 4 percent spring '04 are still looking good.
Not so if they've gone to "HELOC in a handbasket" on the way up to get that spankin' new SUV, plasma and Disney Cruise.
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Beach ComberAuthor
GREENSPAN SAYS HE KNEW ABOUT ABUSES IN SUBPRIME LENDING BUT FAILED TO FORSEE THEIR PARALYZING MARKET EFFECTS UNTIL LATE 2005
Thu Sept 13 2007 12:30:11 ET
Former Federal Reserve Chairman Alan Greenspan admits he "didn't really get it" that the subprime lending trend was significant enough to hurt the economy until very late 2005, but still defends his lowering of interest rates from 2001 until 2004 that critics say caused the crisis in the first place. Greenspan, who led the U.S. Federal Reserve Bank through 18 years and four presidents, speaks to Lesley Stahl in his first major interview, to be broadcast on 60 MINUTES Sunday, Sept. 16 (7:00-8:00 PM, ET/PT) on the CBS Television Network.
Greenspan says he knew about the questionable subprime lending tactics that gave loans to homebuyers and investors with low adjustable interest rates that could rise precipitously, but not the severe economic consequences they posed. "While I was aware a lot of these practices were going on, I had no notion of how significant they had become until very late," he tells Stahl. "I really didn't get it until very late in 2005 and 2006."
Even though one of the Federal Reserve governors raised a red flag on those lending practices, Greenspan says there was little he could do. "Well, it was nothing to look into particularly because we knew there was a number of such practices going on, but it's very difficult for banking regulators to deal with that," says Greenspan.
Several of Greenspan's former Federal Reserve governors have since said that Greenspan's policy of lowering interest rates for three consecutive years early in the decade was wrong because it opened the door for the subprime lenders. They think he kept rates too low for too long. "They are mistaken," Greenspan tells Stahl. "It was our job to unfreeze the American banking system if we wanted the economy to function. This required that we keep rates modestly low," he says.
Some believe today's market slide -- U.S. stocks have lost significant ground over the past few months -- could have been slowed had the current Federal Reserve Chairman Ben Bernanke lowered interest rates like Greenspan did early in the decade. Would he act as dramatically and quickly now as he did then if he were the current chairman as some believe? "I'm not sure that's true," says Greenspan. "We were dealing in an environment back there where inflation was easing. We could have acted without the fear of stoking inflationary pressures. You can't do that anymore... I'm not certain I would have done anything different [if he was the chairman today]," he tells Stahl. "I think [Bernanke] is doing an excellent job."
Thu Sept 13 2007 12:30:11 ET
Former Federal Reserve Chairman Alan Greenspan admits he "didn't really get it" that the subprime lending trend was significant enough to hurt the economy until very late 2005, but still defends his lowering of interest rates from 2001 until 2004 that critics say caused the crisis in the first place. Greenspan, who led the U.S. Federal Reserve Bank through 18 years and four presidents, speaks to Lesley Stahl in his first major interview, to be broadcast on 60 MINUTES Sunday, Sept. 16 (7:00-8:00 PM, ET/PT) on the CBS Television Network.
Greenspan says he knew about the questionable subprime lending tactics that gave loans to homebuyers and investors with low adjustable interest rates that could rise precipitously, but not the severe economic consequences they posed. "While I was aware a lot of these practices were going on, I had no notion of how significant they had become until very late," he tells Stahl. "I really didn't get it until very late in 2005 and 2006."
Even though one of the Federal Reserve governors raised a red flag on those lending practices, Greenspan says there was little he could do. "Well, it was nothing to look into particularly because we knew there was a number of such practices going on, but it's very difficult for banking regulators to deal with that," says Greenspan.
Several of Greenspan's former Federal Reserve governors have since said that Greenspan's policy of lowering interest rates for three consecutive years early in the decade was wrong because it opened the door for the subprime lenders. They think he kept rates too low for too long. "They are mistaken," Greenspan tells Stahl. "It was our job to unfreeze the American banking system if we wanted the economy to function. This required that we keep rates modestly low," he says.
Some believe today's market slide -- U.S. stocks have lost significant ground over the past few months -- could have been slowed had the current Federal Reserve Chairman Ben Bernanke lowered interest rates like Greenspan did early in the decade. Would he act as dramatically and quickly now as he did then if he were the current chairman as some believe? "I'm not sure that's true," says Greenspan. "We were dealing in an environment back there where inflation was easing. We could have acted without the fear of stoking inflationary pressures. You can't do that anymore... I'm not certain I would have done anything different [if he was the chairman today]," he tells Stahl. "I think [Bernanke] is doing an excellent job."
SoWal Insider
Not so if they've gone to "HELOC in a handbasket" on the way up to get that spankin' new SUV, plasma and Disney Cruise.Who mentioned HELOCs? HELOCs will be going down if Ben comes down from his ivory tower.
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SoWal Insider
Who mentioned HELOCs? HELOCs will be going down if Ben comes down from his ivory tower.
HELOCs are a BIG piece of the puzzle. People were using their homes like ATMs--"harvesting" their equity to buy toys, vacations and preconstruction condos in Florida.
If Ben cuts the interest rates, any "savings" will be needed to purchase goods--that will be subjected to increased inflation (food & fuel)--that the Fed says doesn't count.
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Edited
SoWal Insider
Not so if they've gone to "HELOC in a handbasket" on the way up to get that spankin' new SUV, plasma and Disney Cruise.
.
Are you talking about prime HELOCs or subprime?
SoWal Insider
HELOCs are a BIG piece of the puzzle. People were using their homes like ATMs--"harvesting" their equity to buy toys, vacations and preconstruction condos in Florida.Oil hit 79.80 a barrel today. Nothing Ben does controls the price of oil. Oil drives food prices. The last time we had a Fed inflation fighter, the Prime went to 20, and everyone went to the unemployment line. OPEC has long outlasted Volcker.http://www.bloomberg.com/apps/news?pid=20601109&sid=aWSBqmhwbCFw&refer=home
If Ben cuts the interest rates, any "savings" will be needed to purchase goods--that will be subjected to increased inflation (food & fuel)--that the Fed says doesn't count.
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Edited
SoWal Insider
QUOTE=Bob;290628]Oil hit 79.80 a barrel today. Nothing Ben does controls the price of oil. Oil drives food prices. The last time we had a Fed inflation fighter, the Prime went to 20, and everyone went to the unemployment line. OPEC has long outlasted Volcker.http://www.bloomberg.com/apps/news?pid=20601109&sid=aWSBqmhwbCFw&refer=home[/QUOTE]
Paul Volcker stepped up and did what needed to be done at the time. America then (as it is now) was way out of control--he took charge and took responsibility to fix the system...whiners be damned!
As for the "oil scare" back in the 70's, we Americans cracked down and went on fuel rationing (odd & even number plates for gas fillups); bought fuel-efficient cars; turned down/up the thermostats in our homes; cut off hot water at public/government/corporation restrooms; and took out every-other overhead light to save on energy. In other words we came together and stuck our collective thumbs in the eye of the oil-producers. That would never happen again in this day-and-age with our SUV-lovin', McMansion-livin', me-me-me generation.
But it's not only oil that drives food prices. Wages are the #1 expense on the corporate balance sheet--and they've been stagnant for years and years. When inflation takes hold, workers demand more money, which in turn causes the corporation to pass those costs on to the customer and raises prices, which in turn creates more inflation. Another thing that creates inflation is more money chasing after fewer goods. So if the Fed drops the funds rate and lets more money flow into the system, that will add to the inflation problem.
In his heart-of-hearts Ben knows he shouldn't cave to the whims of Wall Street and lower the interest rates because it will only do more harm to the U.S. economic system in the long-run. Even worse, (according to your article) he's taken to employing Quants to essentially "Mark to Model" the outcome of any decision made by the FOMC (so they can have something else to blame for a bad decision?). This type of "Mark to Model" quantitative analysis is what heralded the downfall of the toxic waste Mortgage Backed Securities. Using computer models to predict "what might happen" to the securities if situation "A" followed situation "B" didn't take into account the fraud and manipulation going on inside the subprime mortgage market--and neither can the models prepared by Bernake's Quants predict the outcome of an ill-timed Fed funds cut in a globalized marketplace.
It's gotten to the point that the US is strung-out on credit and just needs a little "liquidity fix"....and then another....and another. The next thing you know we'll be shaving our head and "going commando" out on the town. But I digress--if there is a cut, I recommend that everyone stock up on Parmigiano-Reggiano cheese next week....by Christmas it may be topping $20+ a pound.
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Paul Volcker stepped up and did what needed to be done at the time. America then (as it is now) was way out of control--he took charge and took responsibility to fix the system...whiners be damned!
As for the "oil scare" back in the 70's, we Americans cracked down and went on fuel rationing (odd & even number plates for gas fillups); bought fuel-efficient cars; turned down/up the thermostats in our homes; cut off hot water at public/government/corporation restrooms; and took out every-other overhead light to save on energy. In other words we came together and stuck our collective thumbs in the eye of the oil-producers. That would never happen again in this day-and-age with our SUV-lovin', McMansion-livin', me-me-me generation.
But it's not only oil that drives food prices. Wages are the #1 expense on the corporate balance sheet--and they've been stagnant for years and years. When inflation takes hold, workers demand more money, which in turn causes the corporation to pass those costs on to the customer and raises prices, which in turn creates more inflation. Another thing that creates inflation is more money chasing after fewer goods. So if the Fed drops the funds rate and lets more money flow into the system, that will add to the inflation problem.
In his heart-of-hearts Ben knows he shouldn't cave to the whims of Wall Street and lower the interest rates because it will only do more harm to the U.S. economic system in the long-run. Even worse, (according to your article) he's taken to employing Quants to essentially "Mark to Model" the outcome of any decision made by the FOMC (so they can have something else to blame for a bad decision?). This type of "Mark to Model" quantitative analysis is what heralded the downfall of the toxic waste Mortgage Backed Securities. Using computer models to predict "what might happen" to the securities if situation "A" followed situation "B" didn't take into account the fraud and manipulation going on inside the subprime mortgage market--and neither can the models prepared by Bernake's Quants predict the outcome of an ill-timed Fed funds cut in a globalized marketplace.
It's gotten to the point that the US is strung-out on credit and just needs a little "liquidity fix"....and then another....and another. The next thing you know we'll be shaving our head and "going commando" out on the town. But I digress--if there is a cut, I recommend that everyone stock up on Parmigiano-Reggiano cheese next week....by Christmas it may be topping $20+ a pound.
.
Edited
SoWal Insider
QUOTE=Bob;290628]
The next thing you know we'll be shaving our head and "going commando" out on the town. But I digress--if there is a cut, I recommend that everyone stock up on Parmigiano-Reggiano cheese next week....by Christmas it may be topping $20+ a pound.
.
Romano cheese here only! 
Regardless of how anyone feels about Bernanke, here's a funny.
Beach Fanatic
:boxing: 
SoWal Insider
QUOTE=Bob;290628]Oil hit 79.80 a barrel today. Nothing Ben does controls the price of oil. Oil drives food prices. The last time we had a Fed inflation fighter, the Prime went to 20, and everyone went to the unemployment line. OPEC has long outlasted Volcker.http://www.bloomberg.com/apps/news?pid=20601109&sid=aWSBqmhwbCFw&refer=home
Paul Volcker stepped up and did what needed to be done at the time. America then (as it is now) was way out of control--he took charge and took responsibility to fix the system...whiners be damned!
As for the "oil scare" back in the 70's, we Americans cracked down and went on fuel rationing (odd & even number plates for gas fillups); bought fuel-efficient cars; turned down/up the thermostats in our homes; cut off hot water at public/government/corporation restrooms; and took out every-other overhead light to save on energy. In other words we came together and stuck our collective thumbs in the eye of the oil-producers. That would never happen again in this day-and-age with our SUV-lovin', McMansion-livin', me-me-me generation.
But it's not only oil that drives food prices. Wages are the #1 expense on the corporate balance sheet--and they've been stagnant for years and years. When inflation takes hold, workers demand more money, which in turn causes the corporation to pass those costs on to the customer and raises prices, which in turn creates more inflation. Another thing that creates inflation is more money chasing after fewer goods. So if the Fed drops the funds rate and lets more money flow into the system, that will add to the inflation problem.
In his heart-of-hearts Ben knows he shouldn't cave to the whims of Wall Street and lower the interest rates because it will only do more harm to the U.S. economic system in the long-run. Even worse, (according to your article) he's taken to employing Quants to essentially "Mark to Model" the outcome of any decision made by the FOMC (so they can have something else to blame for a bad decision?). This type of "Mark to Model" quantitative analysis is what heralded the downfall of the toxic waste Mortgage Backed Securities. Using computer models to predict "what might happen" to the securities if situation "A" followed situation "B" didn't take into account the fraud and manipulation going on inside the subprime mortgage market--and neither can the models prepared by Bernake's Quants predict the outcome of an ill-timed Fed funds cut in a globalized marketplace.
It's gotten to the point that the US is strung-out on credit and just needs a little "liquidity fix"....and then another....and another. The next thing you know we'll be shaving our head and "going commando" out on the town. But I digress--if there is a cut, I recommend that everyone stock up on Parmigiano-Reggiano cheese next week....by Christmas it may be topping $20+ a pound.
.[/QUOTE]Yeah, those pesky illegals picking lettuce are forcing iceberg to the moon. Fuel and chemical costs are driving food prices. 14 percent, 30 year money did not effect oil prices. 20 percent prime rates snuffed out the economy and killed inflation by eliminating demand. That's like blowing someone's head off to cure a headache.
Beach Fanatic
BOB
I absolutely and completely agree with your above post. I remember the oil embargo from the 70's. That was really scary. We will muddle through this latest crisis but our best days are behind us.
I absolutely and completely agree with your above post. I remember the oil embargo from the 70's. That was really scary. We will muddle through this latest crisis but our best days are behind us.
SoWal Insider
20 percent prime rates snuffed out the economy and killed inflation by eliminating demand. That's like blowing someone's head off to cure a headache.
It was more like chopping off a cancer-ladened limb to save someone's life.
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SoWal Insider
It was more like chopping off a cancer-ladened limb to save someone's life.not a bad procedure if you've got a nestegg to trade and don't need a job. high interest rates put us in third world liquidity mode.
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Beach Fanatic
Shelly,
So besides the Fed not caving in and cutting the rates, what else should they/we do?
I used to think you were jaded, negative and thought your "imminent meltdown" banner and FL flower sig file were just funny.
But that was a while back. Now you have my attention because much of what you say rings true. OMG, who am I and what am I saying?! hahahaha
All kidding aside, yer right about the mess. So how do we get out of it?
Cheers, G
So besides the Fed not caving in and cutting the rates, what else should they/we do?
I used to think you were jaded, negative and thought your "imminent meltdown" banner and FL flower sig file were just funny.
But that was a while back. Now you have my attention because much of what you say rings true. OMG, who am I and what am I saying?! hahahaha
All kidding aside, yer right about the mess. So how do we get out of it?
Cheers, G
Edited
Beach Fanatic
Shelly,Suffer for a bit. Or more than a bit.
So besides the Fed not caving in and cutting the rates, what else should they/we do?
I used to think you were jaded, negative and thought your "imminent meltdown" banner and FL flower sig file were just funny.
But that was a while back. Now you have my attention because much of what you say rings true. OMG, who am I and what am I saying?! hahahaha
All kidding aside, yer right about the mess. So how do we get out of it?
Cheers, G
Beach Fanatic
What does that mean? My question was-
besides not cutting the rate (which will make some suffer for a bit), what can we do to fix the problem?
besides not cutting the rate (which will make some suffer for a bit), what can we do to fix the problem?
Beach ComberAuthor
Greenspan Book
Criticizes Bush
And Republicans
'They Deserved to Lose';
Former Fed Chief Defends
Pre-Bubble Rate Cuts
By GREG IP and EMILY STEEL
September 15, 2007
In a withering critique of his fellow Republicans, former Federal Reserve Chairman Alan Greenspan says in his memoir that the party to which he has belonged all his life deserved to lose power last year for forsaking its small-government principles.
In "The Age of Turbulence: Adventures in a New World," published by Penguin Press, Mr. Greenspan criticizes both congressional Republicans and President George W. Bush for abandoning fiscal discipline.
The book is scheduled for public release Monday. The Wall Street Journal bought a copy at a bookstore in the New York area.
Mr. Greenspan, who calls himself a "lifelong libertarian Republican," writes that he advised the White House to veto some bills to curb "out-of-control" spending while the Republicans controlled Congress. He says President Bush's failure to do so "was a major mistake." Republicans in Congress, he writes, "swapped principle for power. They ended up with neither. They deserved to lose."
Many economists say the Fed, by cutting short-term interest rates to 1% in mid-2003 and keeping them there for a year, helped foster a housing bubble that is now bursting. In his book, which was largely written before much of the recent turmoil in credit markets, Mr. Greenspan defends the policy. "We wanted to shut down the possibility of corrosive deflation," he writes. "We were willing to chance that by cutting rates we might foster a bubble, an inflationary boom of some sort, which we would subsequently have to address....It was a decision done right."
He attributes the housing boom to the end of communism, which he says unleashed hundreds of millions of workers on global markets, putting downward pressure on wages and prices, and thus on long-term interest rates.
Mr. Greenspan retired in early 2006 after 18 years as chairman of the Federal Reserve. He had served under six presidents as either Fed chairman or adviser. He now runs a private consulting company; his only formal public role is adviser to British Prime Minister Gordon Brown.
Penguin paid an advance of more than $8 million last year for Mr. Greenspan's book, according to people familiar with the matter. Promotion for the book includes appearances by Mr. Greenspan on CBS's "60 Minutes," NBC's "Today" and CNBC, interviews with foreign and U.S. media, book signings and speaking engagements. The book's official release comes a day before the most-watched Fed meeting of the year. On Tuesday, Mr. Greenspan's successor, Ben Bernanke, must decide whether to cut interest rates to cushion the economy from the reversal of the housing boom that began under Mr. Greenspan's watch.
His book is half memoir and half treatise on the state of the world and its future. While much of the ground has been covered either in his own previous public remarks or in other books, Mr. Greenspan sheds new light on many policy decisions, offers often-trenchant observations of the presidents he has known and makes some surprising economic forecasts, unmuffled by the often opaque and complex phraseology he used as Fed chairman. Critics, however, may seize on his continued defense of decisions they say led to first a stock bubble and then a housing bubble, and on some assertions that differ from the historical record.
Mr. Greenspan writes that when President Bush chose Dick Cheney as vice president and Paul O'Neill as treasury secretary -- both colleagues from the Gerald Ford administration, during which Mr. Greenspan was chairman of the Council of Economic Advisers -- he "indulged in a bit of fantasy" that this would be the government that would have resulted if Mr. Ford hadn't lost to Jimmy Carter in 1976. But Mr. Greenspan discovered that in the Bush White House, the "political operation was far more dominant" than in Mr. Ford's. "Little value was placed on rigorous economic policy debate or the weighing of long-term consequences," he writes.
From serving under so many presidents, Mr. Greenspan concludes that there's something abnormal about anyone willing to do what it takes to get the job. Mr. Ford, he writes, "was as close to normal as you get in a president, but he was never elected." The Watergate tapes, he says, show Richard Nixon as "an extremely smart man who is sadly paranoid, misanthropic and cynical." He recalls telling someone who had accused Nixon of anti-Semitism that he "wasn't exclusively anti-Semitic. He was anti-Semitic, anti-Italian, anti-Greek, anti-Slovak. I don't know anybody he was pro."
Ronald Reagan's ability to instantly tap one-liners and anecdotes in support of a particular policy represented an "odd form of intelligence." He describes Bill Clinton as "a fellow information hound" with "a consistent, disciplined focus on long-term economic growth" whose relationship with Monica Lewinsky "made me feel disappointed and sad."
Mr. Greenspan makes no mention of his successor as Fed chairman, Mr. Bernanke, other than in a caption accompanying a picture: "I was very comfortable leaving the post in the hands of such an experienced successor," it reads.
He devotes chapters to each of the major economic challenges facing the U.S. and the world. On energy, he recommends more use of nuclear power, and he predicts efforts to reduce global warming with carbon caps or taxes will fail. Rising income inequality could undo "the cultural ties that bind our society" and even lead to "large-scale violence." The remedy, he says, is not higher taxes on the rich but improved education, which can be helped by paying math teachers more.
Mr. Greenspan returns repeatedly to the far-reaching importance of communism's collapse. He says it discredited central planning throughout the world and inspired China and later India to throw off socialist policies. He recalls meeting a former manager of a produce distribution center in China who says he once had to labor to allocate produce according to government edict; now the allocations are made by auction. "Now I don't have to get up at four a.m.," he quotes the manager as saying. "I can sleep in and let the market do my job for me." Mr. Greenspan recalls his amazement when an adviser to Russian President Vladimir Putin asks him to discuss Ayn Rand, the libertarian philosopher with whom Mr. Greenspan had been friends.
In coming years, as the globalization process winds down, he predicts inflation will become harder to contain. Recent increases in the price of imports from China and a rise in long-term interest rates suggest "the turn may be upon us sooner rather than later."
Left alone, he said, the Fed's policy-making body, the Federal Open Market Committee, can keep inflation between 1% and 2%, but that could require forcing interest rates to double-digits, a level "not seen since the days of Paul Volcker," his predecessor as Fed chairman. "I fear that my successors on the FOMC, as they strive to maintain price stability in the coming quarter century, will run into populist resistance from Congress, if not from the White House," he writes.
If the Fed succumbs to that pressure, inflation could rise from a little over 2% at present to an average of 4% to 5% by the year 2030, he writes. Ten-year Treasury yields, now below 5%, will rise to "at least 8%" with the potential to go "significantly higher for brief periods." This, he says, will lead to stagnant returns on stocks and bonds and much smaller gains in housing prices.
Mr. Greenspan won plaudits for achieving low inflation and unemployment with just two mild recessions during his tenure at the Fed. But more recently his record has taken some knocks. Some critics fault him for not doing more to restrain the stock bubble of the 1990s, and for responding to its eventual bursting with such low interest rates that housing prices subsequently soared.
Mr. Greenspan writes that in early 1997, he told his colleagues the Fed should raise interest rates as a "preemptive" move against a stock-market bubble. But transcripts of Fed meetings from that period do not support his book's version of events: They show Mr. Greenspan argued for a rate increase principally because of inflation.
Criticizes Bush
And Republicans
'They Deserved to Lose';
Former Fed Chief Defends
Pre-Bubble Rate Cuts
By GREG IP and EMILY STEEL
September 15, 2007
In a withering critique of his fellow Republicans, former Federal Reserve Chairman Alan Greenspan says in his memoir that the party to which he has belonged all his life deserved to lose power last year for forsaking its small-government principles.
In "The Age of Turbulence: Adventures in a New World," published by Penguin Press, Mr. Greenspan criticizes both congressional Republicans and President George W. Bush for abandoning fiscal discipline.
The book is scheduled for public release Monday. The Wall Street Journal bought a copy at a bookstore in the New York area.
Mr. Greenspan, who calls himself a "lifelong libertarian Republican," writes that he advised the White House to veto some bills to curb "out-of-control" spending while the Republicans controlled Congress. He says President Bush's failure to do so "was a major mistake." Republicans in Congress, he writes, "swapped principle for power. They ended up with neither. They deserved to lose."
Many economists say the Fed, by cutting short-term interest rates to 1% in mid-2003 and keeping them there for a year, helped foster a housing bubble that is now bursting. In his book, which was largely written before much of the recent turmoil in credit markets, Mr. Greenspan defends the policy. "We wanted to shut down the possibility of corrosive deflation," he writes. "We were willing to chance that by cutting rates we might foster a bubble, an inflationary boom of some sort, which we would subsequently have to address....It was a decision done right."
He attributes the housing boom to the end of communism, which he says unleashed hundreds of millions of workers on global markets, putting downward pressure on wages and prices, and thus on long-term interest rates.
Mr. Greenspan retired in early 2006 after 18 years as chairman of the Federal Reserve. He had served under six presidents as either Fed chairman or adviser. He now runs a private consulting company; his only formal public role is adviser to British Prime Minister Gordon Brown.
Penguin paid an advance of more than $8 million last year for Mr. Greenspan's book, according to people familiar with the matter. Promotion for the book includes appearances by Mr. Greenspan on CBS's "60 Minutes," NBC's "Today" and CNBC, interviews with foreign and U.S. media, book signings and speaking engagements. The book's official release comes a day before the most-watched Fed meeting of the year. On Tuesday, Mr. Greenspan's successor, Ben Bernanke, must decide whether to cut interest rates to cushion the economy from the reversal of the housing boom that began under Mr. Greenspan's watch.
His book is half memoir and half treatise on the state of the world and its future. While much of the ground has been covered either in his own previous public remarks or in other books, Mr. Greenspan sheds new light on many policy decisions, offers often-trenchant observations of the presidents he has known and makes some surprising economic forecasts, unmuffled by the often opaque and complex phraseology he used as Fed chairman. Critics, however, may seize on his continued defense of decisions they say led to first a stock bubble and then a housing bubble, and on some assertions that differ from the historical record.
Mr. Greenspan writes that when President Bush chose Dick Cheney as vice president and Paul O'Neill as treasury secretary -- both colleagues from the Gerald Ford administration, during which Mr. Greenspan was chairman of the Council of Economic Advisers -- he "indulged in a bit of fantasy" that this would be the government that would have resulted if Mr. Ford hadn't lost to Jimmy Carter in 1976. But Mr. Greenspan discovered that in the Bush White House, the "political operation was far more dominant" than in Mr. Ford's. "Little value was placed on rigorous economic policy debate or the weighing of long-term consequences," he writes.
From serving under so many presidents, Mr. Greenspan concludes that there's something abnormal about anyone willing to do what it takes to get the job. Mr. Ford, he writes, "was as close to normal as you get in a president, but he was never elected." The Watergate tapes, he says, show Richard Nixon as "an extremely smart man who is sadly paranoid, misanthropic and cynical." He recalls telling someone who had accused Nixon of anti-Semitism that he "wasn't exclusively anti-Semitic. He was anti-Semitic, anti-Italian, anti-Greek, anti-Slovak. I don't know anybody he was pro."
Ronald Reagan's ability to instantly tap one-liners and anecdotes in support of a particular policy represented an "odd form of intelligence." He describes Bill Clinton as "a fellow information hound" with "a consistent, disciplined focus on long-term economic growth" whose relationship with Monica Lewinsky "made me feel disappointed and sad."
Mr. Greenspan makes no mention of his successor as Fed chairman, Mr. Bernanke, other than in a caption accompanying a picture: "I was very comfortable leaving the post in the hands of such an experienced successor," it reads.
He devotes chapters to each of the major economic challenges facing the U.S. and the world. On energy, he recommends more use of nuclear power, and he predicts efforts to reduce global warming with carbon caps or taxes will fail. Rising income inequality could undo "the cultural ties that bind our society" and even lead to "large-scale violence." The remedy, he says, is not higher taxes on the rich but improved education, which can be helped by paying math teachers more.
Mr. Greenspan returns repeatedly to the far-reaching importance of communism's collapse. He says it discredited central planning throughout the world and inspired China and later India to throw off socialist policies. He recalls meeting a former manager of a produce distribution center in China who says he once had to labor to allocate produce according to government edict; now the allocations are made by auction. "Now I don't have to get up at four a.m.," he quotes the manager as saying. "I can sleep in and let the market do my job for me." Mr. Greenspan recalls his amazement when an adviser to Russian President Vladimir Putin asks him to discuss Ayn Rand, the libertarian philosopher with whom Mr. Greenspan had been friends.
In coming years, as the globalization process winds down, he predicts inflation will become harder to contain. Recent increases in the price of imports from China and a rise in long-term interest rates suggest "the turn may be upon us sooner rather than later."
Left alone, he said, the Fed's policy-making body, the Federal Open Market Committee, can keep inflation between 1% and 2%, but that could require forcing interest rates to double-digits, a level "not seen since the days of Paul Volcker," his predecessor as Fed chairman. "I fear that my successors on the FOMC, as they strive to maintain price stability in the coming quarter century, will run into populist resistance from Congress, if not from the White House," he writes.
If the Fed succumbs to that pressure, inflation could rise from a little over 2% at present to an average of 4% to 5% by the year 2030, he writes. Ten-year Treasury yields, now below 5%, will rise to "at least 8%" with the potential to go "significantly higher for brief periods." This, he says, will lead to stagnant returns on stocks and bonds and much smaller gains in housing prices.
Mr. Greenspan won plaudits for achieving low inflation and unemployment with just two mild recessions during his tenure at the Fed. But more recently his record has taken some knocks. Some critics fault him for not doing more to restrain the stock bubble of the 1990s, and for responding to its eventual bursting with such low interest rates that housing prices subsequently soared.
Mr. Greenspan writes that in early 1997, he told his colleagues the Fed should raise interest rates as a "preemptive" move against a stock-market bubble. But transcripts of Fed meetings from that period do not support his book's version of events: They show Mr. Greenspan argued for a rate increase principally because of inflation.
Beach ComberAuthor
Alan Greenspan claims Iraq war was really for oil
http://www.timesonline.co.uk/tol/news/world/article2461214.ece
AMERICA?s elder statesman of finance, Alan Greenspan, has shaken the White House by declaring that the prime motive for the war in Iraq was oil.
In his long-awaited memoir, to be published tomorrow, Greenspan, a Republican whose 18-year tenure as head of the US Federal Reserve was widely admired, will also deliver a stinging critique of President George W Bush?s economic policies.
However, it is his view on the motive for the 2003 Iraq invasion that is likely to provoke the most controversy. ?I am saddened that it is politically inconvenient to acknowledge what everyone knows: the Iraq war is largely about oil,? he says.
Greenspan, 81, is understood to believe that Saddam Hussein posed a threat to the security of oil supplies in the Middle East.
http://www.timesonline.co.uk/tol/news/world/article2461214.ece
AMERICA?s elder statesman of finance, Alan Greenspan, has shaken the White House by declaring that the prime motive for the war in Iraq was oil.
In his long-awaited memoir, to be published tomorrow, Greenspan, a Republican whose 18-year tenure as head of the US Federal Reserve was widely admired, will also deliver a stinging critique of President George W Bush?s economic policies.
However, it is his view on the motive for the 2003 Iraq invasion that is likely to provoke the most controversy. ?I am saddened that it is politically inconvenient to acknowledge what everyone knows: the Iraq war is largely about oil,? he says.
Greenspan, 81, is understood to believe that Saddam Hussein posed a threat to the security of oil supplies in the Middle East.
Edited
Beach Fanatic
"...The last time we had a Fed inflation fighter, the Prime went to 20, and everyone went to the unemployment line. .."
I remember well the "Reagan economic miracle."
In Dec. '82 I was waiting in line to pick-up
my (useless) college diploma without a job
waiting for me.
An informal poll of others in the line revealed
many in the same situation.
The headlines in the local newspaper for the
week:
"Worst unemployment in 40 years."
40 years earlier was the depression.
(cured by WW II)
And so began the decade of the '80s, not
a very profitable decade for me.
Taught me to be conservative with my finances.
I remember well the "Reagan economic miracle."
In Dec. '82 I was waiting in line to pick-up
my (useless) college diploma without a job
waiting for me.
An informal poll of others in the line revealed
many in the same situation.
The headlines in the local newspaper for the
week:
"Worst unemployment in 40 years."
40 years earlier was the depression.
(cured by WW II)
And so began the decade of the '80s, not
a very profitable decade for me.
Taught me to be conservative with my finances.
SoWal Insider
"...The last time we had a Fed inflation fighter, the Prime went to 20, and everyone went to the unemployment line. .."
I remember well the "Reagan economic miracle."
In Dec. '82 I was waiting in line to pick-up
my (useless) college diploma without a job
waiting for me.
An informal poll of others in the line revealed
many in the same situation.
The headlines in the local newspaper for the
week:
"Worst unemployment in 40 years."
40 years earlier was the depression.
(cured by WW II)
And so began the decade of the '80s, not
a very profitable decade for me.
Taught me to be conservative with my finances.
How much in student loans and credit card debt were you carrying at the time?
.
Edited
SoWal Insider
Ben will do little or nothing on Tuesday....
Meow
After watching Mr. G on 60 Minutes last night...I must say I have a little crush. 
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