Former Federal Reserve Chair Alan Greenspan says it’s inaccurate for some financial commentators and contrarian investors to blame the central bank for the latest economic collapse when he was head of the Fed from 1987 to 2006.
Critics of the Fed regularly argue that it was the monetary policies of artificially low interest rates, credit expansions and easy money that led to the financial meltdown and the Great Recession a few years ago. Greenspan argues that this is false.
Greenspan conceded that the Fed did slash interest rates, but he doesn’t necessarily think this contributed to the massive economic downturn.
“Despite the fact that we lowered rates, we did not have long-term rates moving down. We did not have money supply accelerating. There were no fingerprints of an easy money policy in the marketplace,” the former Fed Chair told CNBC on Wednesday. “I’ve made lots of mistakes in the 18½ years that I was at the Fed. I don’t think that that one was one and I don’t think that we were as an organization significantly involved in what was happening in the global markets.”
In the end, it was the subprime mortgage crisis that created the global economic disintegration.
Poppycock?
To say that the Fed was not at fault for the financial collapse could very well be described as being completely disingenuous to say the least.
The policy of turning on the printing presses for many years is what helped contribute to the immense speculation and leveraged trading practices that transpired on Wall Street. Punching the spike bowl and pleading ignorance can only fool some financial analysts because they were and still are blinded by the extravagance and exuberance in the stock market.
The Fed had been ignorant in the past, too, when other market crashes took place and it never realized that it was its own failed monetary policies that aided the derelictions in today’s marketplace and the unsound economic foundation that has engulfed the United States.
Bubble formations, exponential inflation and toxic decisions have eliminated all delusions of a self-correcting market, though it is badly needed. The former proponent of the gold standard and student of objectivism likes to reject any of facts pertaining to his disastrous reign at the helm of the Fed.
Does Greenspan also claim he/TheFed are not responsible for the disasterous collapse associated with the “dot-com” bust? Greenspan caused that nightmare. Starting in mid-1999 and continuing for 8 months, he jacked up interest rates. The dotcoms stubbornly refused to cool down at first, but eventually they did ‘bust.’ But in order to bring about this power trip, Greenspan tremendously depressed the ENTIRE economy as well.
He should have simply let the irrational exhuberent dotcoms die by themselves, noisy as that would have been.
Add: do not attempt to drag Objectivism into the blame game for actions of The Federal Reserve or any of its employees. Just because Greenspan was once and Objectivist does not mean he acted according to its principles.
Greenspan doesn’t want to be listed as a footnote that he caused the downfall of America.