From an article on CNNfn last Friday:
Alan Greenspan Chairman Alan Greenspan on Friday defended the central bank’s monetary policy, rejecting suggestions that the Fed helped trigger the economic slowdown because it waited too long to reduce interest rates.
Greenspan, in testimony to the House Budget Committee, said he did not accept the view of critics that the central bank responded too slowly to growing signs of weakness in the economy.
He said the Fed’s series of rate increases that ended last May probably prevented an even more severe slowdown, and added that if the Fed had moved too soon to cut rates, the central bank could have forced bigger economic problems. The Fed lowered interest rates in January by a full percentage point in an effort to stimulate economic growth.
“In retrospect, I see nothing that we did that was inappropriate in terms of policy,” Greenspan said in response to lawmakers’ questions.
Many have argued that Greenspan is in denial, refusing to accept any culpability for causing the recession. Hear no evil, see no evil, speak no evil.
I wish it were true. I wish it were as simple as that. But I think the truth is much worse. I think there are two other possible explanations for Greenspan’s behavior, either of which are more likely than denial.
One possibility is that Greenspan has developed an infallibility complex. This seems more likely than denial. If you are infallible, then you must by definition blame your mistakes and shortcomings on others, and Greenspan has certainly been blaming the recent performance of the economy on irrationally fearful consumers.
And infallibility goes hand in hand with smugness and arrogance, which are certainly evidenced in Greenspan’s comment, “I hope I was sufficiently ambiguous not to have indicated timing of when or if we would move. I hope I was adept at what we term ‘Fedspeak’ on that issue … a couple days ago.”
Where’s a tube sock full of wood screws when you need one?
The other alternative, equally plausible, is that Greenspan knows how bad the economy is, knows that his deflationary policies are to blame, and chooses to lie about his involvement.
Unfortunately, Alan Greenspan is no better at lying — no more convincing — than I was when I was as a young lad. I can still remember the day I broke a table in our living room. I couldn’t have been more than four years old — old enough to lie, but not smart enough to weave a web of deception around the lie to make it believable. My mother, upon noticing the broken table, asked me, “Who did it?”
“Phil did,” I replied.
I was off the hook, I thought. My brother would never know what hit him. Poor bastard. But after all, what are older brothers for?
Unfortunately, unlike the senators who lob softballs to Alan Greenspan, my mother had the temerity to throw some high hard ones in the form of a couple of follow up questions:
“Where were you when this happened?” she asked.
“Right here,” I said, ever so sweetly. (Gosh I was such a lovable tyke.)
“And where was Phil?” she asked.
“In school,” I said.
I told you I wasn’t bright enough to pull it off.
And neither is Greenspan. If my mother were still here today, I would love to see her make Greenspan squirm. The questioning would go something like this:
“Who broke the economy?”, she would ask Greenspan.
“The irrationally fearful consumer,” Greenspan would reply.
“And where were you when the economy broke?”, mom would ask.
“Right here equating prosperity with inflation, raising interest rates through the roof, talking Fed doublespeak, and generally just laughing my butt off and having one helluva good time,” Greenspan would reply.
“And where were these irrational consumers when the economy broke?” asks mom.
“Collecting pink slips, filing for unemployment, and postponing purchases for luxuries like food,” Greenspan replies.
Way to go, mom!
On a separate and related subject, I received enough anti-Greenspan mail from two previous columns on Alan Greenspan to fill a book. Many of these letters contained some rather imaginative fantasies about what people would like to see happen to the exalted, infallible head of Fed. Some of the letters even contained a few coherent sentences and correctly spelled words.
But if you are looking for some fitting punishments for the person who almost single handedly destroyed the economic expansion and bull market, look no further than Jan Bondeson’s new book, “Buried Alive”, which was reviewed in the March 5 issue of Forbes magazine.
It seems that back in the 18th and 19th century, premature diagnosis of death was a significant problem, so much so that a variety of repulsive stimuli were developed to ensure that corpses were…..well….corpses. These stimuli included urine mouth washing (yuck!), tobacco smoke enemas, nipple pinching, and my personal favorite, a red hot poker up the butt.
Now ignoring for a moment that a red hot poker up the butt would probably finish the job if you had in fact been prematurely diagnosed as deceased, I can’t help but daydream about administering some of these repulsive stimuli to Greenspan. If he can’t stimulate the economy, perhaps we can at least stimulate him.
