Tuesday, September 18, 2007

Alan Greenspan and His CYA Tour

By Ken Hart
Former Federal Reserve Chief Alan Greenspan is making a lot of waves with his new memoir, "The Age of Turbulence." The official subtitle is "Adventures in a New World," but based on his comments in interviews, it should be "It's Not My Fault!"

This man has been portrayed as a financial genius, an elderly Harry Potter of the economy. And maybe some of that is deserved. But let's not forget that he failed to adequately prepare the economy for the bursting of the dot-com bubble in the late '90s, just as he suggests that he was taken off-guard by the current collapse of the housing market. Other economists, such as a professor at Stanford, say that Greenspan's own post-2001 interest rate cuts artificially inflated the housing boom; Greenspan retorts that the housing boom was a "global" phenomenon and that he takes absolutely no blame (a strong view that he reiterated on the "Today" show Monday morning).

Other folks with much better knowledge of economics than me can debate Greenspan's financial merits, but Greenspan raised a bigger ruckus by: 1) attacking the fiscal policies of George W. Bush, and 2) making this statement in his book:

"I am saddened that it is politically inconvenient to acknowledge what everyone knows: the Iraq war is largely about oil."

Immediately - and understandably - bloggers and politicians on the left seized on this as an affidation - from a Republican insider! - of what we already knew: Iraq was invaded not because of WMD, but because of the advantage the U.S. would gain by seizing an oil-rich nation in the center of the Middle East.

Almost as immediately, however, Greenspan started backtracking from this comment. In an interview with the Wall Street Journal, Greenspan said:
"My view of Saddam over the 20 years … was that he was very critically moving towards control of the Strait of Hormuz and as a consequence of that, control of the oil market."

The Strait of Hormuz is very important - much of the world's oil supply travels through it, and Greenspan said on the "Today" show that if Saddam got control of it, oil prices could practically triple in a short period of time. Sounds bad, right?

A financial wizard Greenspan may be, but he clearly got a D in geography. As has been pointed out elsewhere, Iraq doesn't touch the Strait of Hormuz. After the Gulf War, Saddam had no naval capability, and his air force was grounded. So, to take control of the Strait, he would have needed to send his troops across miles of hostile territory to seize one or more ports ... and, oh yeah, go toe-to-toe with the U.S. Navy once he got there.

As for the Bush fiscal policy, Greenspan has taken criticism for backing Bush's disastrous tax cuts for the wealthy -- the results of which are now being felt. Greenspan now says, in essence, that he backed "a" tax cut, not necessarily Bush's tax cuts. Again, Greenspan maintains that he bears no blame for the current fiscal problems.

What's going on here? It certainly sounds like Greenspan, like many other Republicans who see the GOP Gravy Train running off the tracks, is trying to salvage his legacy and cover his butt by saying that he was an innocent bystander to everything that happened during the Bush Administration. He even tries to have it both ways by saying that recession odds have grown yet the economy "is not doing badly." No matter what happens, he wants to be seen as the Economical Karnak.


Scott Cavanagh said...

Greenspan's book tour revelations are so similiar to those of everyone that leaves government during the Bush presidency. Much like Colin Powell's talk of disagreeing with Bush, Cheney and Rumsfeld about the case for war, Greenspan's talk, in retrospect, of troubles with the Bush tax cuts are just crap and too little too late.

Carter McCoy said...

For so long, Greenspan has been touted as this little genius with a mid of his own, when in fact, he has proven out to be a usable little tool for both Democrat and Republican administrations. You can't argue that on a whole he did a good job, but I think we're much better off steering clear of FedMan cheerleading in the future.

Rick Graves said...

"But let's not forget that he failed to adequately prepare the economy for the bursting of the dot-com bubble in the late '90s, "

I am not seeing this criticism! His job allows him to dictate Monetary policy - not Consumer Spending in the Stock Market.

6 Months prior to the bubble bursting he warned everyone their was an "irrational exuberance in the market".

Raising Fed Fund Rates would have done little to control the glutony which existed.

Economics is classified as a "Social Science". No Fed Chairman can control rational consumers in the market place.

I agree that the genius tag is probably not deserved. But, In reading the posts it seems we all agree he deserves "some" credit.

He did. after all, keep the country out of any sustained periods of recession or inflation. Pretty tricky stuff - especially during the dot.com boom when tremendous amounts of paper and liquid wealth were being created over night!

He constantly warned of the ill effects of defecit spending. Clinton based much of his economic policy upon this guidance. Our economy will be paying for Jr's mistakes for a long time to come!

As for his book tour what is the crime in cashing in as 1000's before have? You are free to buy the book or ignore the old man.

Ken Hart said...


Point taken about Greenspan and the dotcom bubble. That was the result of venture capitalists funding dotcoms that looked great in the short term but had no long-term business plans. Consumers saw the surge of wildly successful IPOs, got greedy, and - thanks to online trading - suddenly started treating the stock market like a fantasy football league. So I'll withdraw that particular criticism.

As for selling his book, sure, let him try to make money. I'm not debating that -- I'm simply taking issue with his selective memory regarding his support for the Bush tax cuts and his wacky rationale for the invasion of Iraq.

Thanks for the comments!


Michael Hart said...

Ken Hart's point that Mr. Greenspan is trying to cover his butt is spot on. Mr. Greenspan, like many other Republican memoir writers (see Bremer, Powell, Tenet, Card, Franks, etc.), wants to distance himself from Dubya's disastrous policies yet still wants to be seen as a loyal Republican. The joke is that they had a chance to be not only loyal Republicans but a loyal Americans by opposing Bush's policies but they blew it, in Dick Cheney's words, "big time."
Mr. Greenspan was on "60 Minutes" (9/16/07) where he admitted that President Clinton was the smartest President he worked with and that he was “extraordinarily effective.” Mr. Greenspan also stated that he thought Hillary Clinton was “very smart” and “unquestionably capable” to handle the Presidency . However, he continued by saying to “60 Minutes” reporter Lesley Stahl, “The question is she the best person for the job?"
"And?" Stahl asked. “My tendency would be to vote Republican” Greenspan added.
Mr. Greenspan still wants to be chummy with his Republican pals; perhaps what his mentor, the noted author and ultra-capitalist Ayn Rand (of “The Fountainhead” and “Atlas Shrugged” fame) said about him (told by Lesley Stahl during the “60 Minutes” segment) is very true, that Mr. Greenspan is “too much of a social climber.” Mr. Greenspan still wants to socialize with his rich GOP friends and that last remark is his way of saying, I’m still with you guys.