Alan Greenspan on The Daily Show

Since its a quiet holiday Monday, how about some Greenspan-related fun: 

A stunningly revealing interview that Jon Stewart conducted with Easy Al on the 9/18 “Daily Show."  It’s telling that the most of the media (and Wall Street) are ignoring Easy Al’s answers.

Easy Al admits to Jon Stewart:

1) Excess money causes inflation.
2) Fed easy credit favors stock market operators at the expense of savers. 
3) The Fed believes that the market trades more on perception of what the Fed is or will do instead of the actual policies. 
4) The Fed must make the market perceive that the system is sound.
5) The presence of the Fed guarantees there is no ‘free market’. 
6) He still can’t forecast the economy or whether there is a bubble or too much exuberance.

Here’s a transcript of the interview (via Dummy Spots):

Stewart: (after Greenspan’s explanation that the market moves on expectations of the Fed move, not the fundamentals of it) So the Fed, or whoever’s leading it, if they wanted to could in fact “goof” on all of us…         

Greenspan: (smiles) You wouldn’t want to.

Stewart: When you say “Open Market,” I always wonder… Why do we have a Fed? Wouldn’t the market take care of interest rates and all that? Why do we have someone adjusting rates if we are a free market society? 

Greenspan: We didn’t need a central bank when we were on the Gold Standard . .  . [Conspiracy theorists note- the Fed was created 20 years BEFORE we decoupled from the Gold Std] . . .  people would buy and sell gold and the markets would do what the Fed does now. . . but by the 1930s most everybody in the  world decided that the Gold Standard was strangling the economy and universally the Gold Standard was abandoned…you need somebody out there or some mechanism to determine how much money is out there because the amount of money in an economy relates to the amount of inflation…

Stewart: So we’re not a free market then – there is an invisible…a “benevolent” hand that touches us…

Greenspan: Absolutely, you are quite correct. To the extent that there is a central bank governing the amount of money in the system, that is not a Free Market, and most people call it regulation.

Stewart: When you lower interest rates, it drives money to stocks and lowers the return people get on savings.      

Greenspan: Yes, indeed.

Stewart: So they’ve made a choice – “We would like to favor those who invest in the stock market and not those who [save]”… 

Greenspan: That’s the way it comes out, but that’s not the way we think about it.

Stewart: Explain that to me. It seems to me that we favor investment, but we don’t favor work. The vast majority of people work, they pay payroll taxes, and they use banks. And then there’s this whole other world of hedge funds and short betting… y’know, it seems like craps. And they keep saying, “No no no, don’t worry about it, it’s Free Market, that’s why we live in much bigger houses.” But it really is, it’s the Fed, or some other thing, no?

Greenspan: I think you’d better re-read my book. 

Stewart: Am I wrong that we penalize work by not making the choice to…

Greenspan: No, what a sound money system does is to stabilize the elements in it and reduce the uncertainty that people confront, and when people confront uncertainty they withdraw and it reduces economic activity…

Stewart: So it’s all about perception then. It’s about making people believe the system is sound. If the stock market is high, people feel confident in spending, and if it lowers, they feel less confident?

Greenspan: Well…uh…I think you have to realize, there are certain aspects of human nature, which  move exactly the way you defined it. The problem is, periodically we all go a little bit euphoric until we are assuming with confidence that everything is terrific, there will be no problems, nothing will ever happen, and then it dawns on us- NO!

Stewart: And then it goes the other way.   

Greenspan: Exactly.   

Stewart: Huge Fear.

Greenspan: I was telling my colleagues the other day…I’d been dealing with these big mathematical models for forecasting the economy, and I’m looking at what’s going on the last few weeks and I say, “Y’know, if I could figure out a way to determine whether or not people are more fearful, or changing to euphoric… I don’t need any of this other stuff. I could forecast the economy better than any way I know.  The trouble is, we can’t figure that out. I’ve been in the forecasting business for 50 years, and I’m no better than I ever was, and nobody else is either.”

Stewart: (Leans back in chair)…You just bummed the sh*t outta me!

And here’s something I never thought I would type:  Alan Greenspan on The Daily Show

Video via Comedy Central

What's been said:

Discussions found on the web:
  1. Florida commented on Oct 8

    It takes Jon Stewart to point out the obvious. Kind of a sad commentary on our media and society.

  2. Justin commented on Oct 8

    I sure wish they would let “fear” run its course a little longer than they have been, because they are making this economy one big joke to the rest of the world. No! lets all just stop working and borrow and spend, borrow and spend, and spend!!!

  3. KP commented on Oct 8

    Always nice to wake up in the morning and realize that the Fed is “regulating” away my net worth and my dream of NOT WORKING UNTIL I DIE.

  4. Estragon commented on Oct 8


    Hasn’t it always been so? Hasn’t comedy been used throughout our history to discuss topics in ways that serious dialogue never could?

  5. bucky katt commented on Oct 8

    Jon Stewart is brilliant. Remember the shout show he was a guest on and told that dweeb
    “I won’t be your monkey”

    He is a modern day Will Rogers.

    A great Will Rogers quip>

    “The return OF my money
    is more important
    than the return ON my money”

  6. JWC commented on Oct 8

    I was watching Stewart that night and was in awe of the number he did on Greenspan. He is head and shoulders about the shills on cable television. I was surprised that Greenspan went on the show… and am not surprised that the answers he gave Stewart have not been more widely discussed.

    (Stewart also did a real number on Chris Matthews a few days ago.)

  7. lux commented on Oct 8

    Jon Stewart is pretty much the only show I’ll watch live anymore. I love that he’s able to get such great guests onto his show and talk to them in a way that nobody else on TV will.

  8. wunsacon commented on Oct 8

    million dollar watch, why not make your point politely or constructively?

  9. Eclectic commented on Oct 8

    I must observe that Greenspan is much like a defendant who has been told repeatedly by his defense attorney to keep his mouth shut… but he won’t.

  10. Winston Munn commented on Oct 8

    Sounds to me that Greenspan, although unknowingly, has admitted that he would have been better off studying the Austrian school:

    “Praxeology rests on the primordial fact that individuals engage in conscious actions toward chosen goals.”

    Without taking into account the p-s-y-c-h-o-l-o-g-i-c-a-l aspects of policy, you may have reached a decision that would work in an adroid society, but that decision has little chance of success in a human-based world.

    Ask Eclectic if this isn’t right – it isn’t so much what a computer model says about an econony’s money but how individuals p-e-r-c-e-i-v-e their individual money that creates actions.

  11. Joe Klein’s conscience commented on Oct 8

    bucky katt:
    You are talking about Stewart’s appearance on Crossfire. He said that to Tucker Carlson. Isn’t it telling that Crossfire only lasted another week? Kinda funny that the two best appearances on Crossfire were Jon Stewart and Frank Zappa.

  12. Dave L commented on Oct 8

    Yes, Jon Stewart is brilliant. A very funny guy, but give him just five minutes with Greenspan and he does a better job — more focused, pointed questions with much better follow-up — than any of the “serious” news mavens.

  13. David commented on Oct 8

    Greenspan and Bernanke have lost a great deal of respect and with it an assumption of good faith and competence.

    “They lose it that do buy it with much care.” Shakespeare
    “The Merchant of Venice”

  14. Shrek commented on Oct 8

    Wow, I am really surprised no one has picked up on this interview. That is about as candid as it can get. I suppose Wall Street has a vested interest in not making noises about this stuff. At some point the market could start a de facto gold standard because no one will be able to trust all the paper. I wish Hayek was alive.

  15. rickrude commented on Oct 8

    i can’t believe all this waste of
    cyber space for Greenspan.
    Anybody here, if put in the position of
    Bernanke or Greenspan, with any IQ above
    1, would also be able to increase Money supply and cause inflation like they have done.

    So what is the use talking about it ?

  16. DavidB commented on Oct 8


    That feeling that tells me to keep my hands away from the hot stove. What a bad thing that is…and so wrong too. Isn’t it great that the fed has eliminated the fear of a hot market? Now I can rush in to a frothing market with confidence knowing the fed and the US taxpayer, saver and dollar holder will bail me out lest I get fearful

    At some point the market could start a de facto gold standard because no one will be able to trust all the paper


    The market already has. How many people do you know that keep all their money in cash? Most people will transfer their money out of cash and into something of value the minute they get the cash. Either into RE, hard assets or stocks but they won’t keep it in cash. That indicates there is no confidence to keep their money in cash because they believe it will not hold its value or gain in value as it did pre-fed. bottom line assets are the defacto gold standard

  17. Eclectic commented on Oct 8


    …Get out wit’cho catallactic self!

    BTW, you’re on your own now. Don’t be spittin’ out praxeology and then hand me the chalk and walk out.

  18. DavidB commented on Oct 8

    million dollar watch,

    Just remember, you don’t have to read this.

    Why do people complain so bitterly when they can just go to another site?

  19. François commented on Oct 8

    Growing bad feelings in Europe concerning the US way of dealing with money.

    The whole thing will end up badly anyway. But at least… Steward is making a lot of us here in Europe feel “Not everything is corrupt and rotten in the States”.

    US we like again. We need a lot more of it.

  20. Winston Munn commented on Oct 8


    It’s so much more rewarding to think, analyze, and reason than to memorize and be slavish to a bunch of numbers and letters and equal signs, no?

    Did you read Mishkin’s paper that was included in the Weekend Preview? That’s what happens when you spend too much time locked in the Ivory Tower – you begin to believe your hallucinations are real.

    I wonder how long its been since either Slashman or Frederic has been shopping at WalMart?

  21. David commented on Oct 8

    Good posts, however, Cash is King. Backup by the bodygaurd of future mineral energy resources of the USA and Canada. I wouldn’t trust anything else, not the City Slicking Bernanke or Greenspan. Trust is earned, and they have not earned trust.
    The Truth is Cash is King.

    “for truth is truth to the end of reckoning.” William Shakespeare

  22. Billy Frangalina commented on Oct 9

    Think the wheels are coming off the chariot. Read about the big WaMu write down recently?
    Now their stock is going up! And it’s the heaviest bought after-market volume!!!!!

    “Washington Mutual Inc. topped the list in late trading on Monday for Buying
    on Weakness, which tracks stocks that fell in price but had the largest inflow
    of money. See the full list.” (Forbes)

    All we need is a GW3 trigger to cover up monetization of the credit con onto the Fed, and from there onto the US taxpayers. This is a purely simply a black ops S&L bailout.

    Fed is pumping the failing bank stocks in after hours trading, while the same failing lenders are writing down lost interest they can’t dump their radioactive portfolios of.

    It’s a goombah insurance plan to hide the mark-to-market true valuation and prevent any fire sale auction that would show just how badly investors have gotten f–ked.

    Fed is underwriting it by inflating the US economy and crashing our US$-based 401k’s.

  23. Eclectic commented on Oct 9


    I did read it. It’s the speech he gave at Jackson Hole.

    Its thesis runs contrary to Bernanke’s observation in his own Jackson Hole speech (the one I performed a head-to-toe autopsy on), because Bernanke correctly observed that monetary policy has lost much of its effectiveness in the monetary transmission mechanism related to housing, because of vast supplies of mortgage securitization products that have obviated FOMC edicts.

    Essentially he and Bernanke therefore offered papers that composed a sort of Jackson Hole Duel.

    Ivory Tower?… hmmm?… I don’t think so much so about Bernanke. I don’t doubt the intellectual honesty or veracity of either man, but I do think Mishkin is more Ivory.

  24. Eclectic commented on Oct 9


    “Cash… yes, friends, lend me your ears!… Cash, be it a poultice, for it wilt divert the slings and arrows shot at you by outrageous motor truckers.”

  25. Eclectic commented on Oct 9

    BTW, Winston… “Slashman and Frederic”… funny routine… I forgot to compliment you.

  26. Marcus Aurelius commented on Oct 9

    So, it breaks down to using an ethereal, fluctuating and arbitrary “standard” (money supply), instead of a tangible, measureable, reality-based standard (gold, silver, RE, ect.).

    Sounds like religion to me. That explains the fear and euphoria Greenspan is talking about.

    Gold help us all.

  27. Mike Nomad commented on Oct 9

    What a sad state of affairs:

    The Spanner walks away from his Fed gig, and only then does he use language you can understand, and talks truth that would have otherwise caused a meltdown if he said it while at the Fed.

    Nice observation Billy F. Working for the state, I get R*tF*ck*d: I am forced to contribute to either the State retirement system (that simply gives back only what I put in if I leave early), or a 403(b). I could do better things with the money to ensure my long-term survival, but as you point out, it’s not about me.

    Nice story, Barry.

  28. CD Rates commented on Oct 9

    Everything is going up in price, yet there is relatively low inflation.

    Oh! that’s right. Food, Gas, Energy, etc. aren’t part of the equation.

    When a gallon of milk costs more than a gallon of gas, we are in trouble.


  29. Douglas Watts commented on Oct 10

    Last year at this time a quart of store brand milk at my local supermarket cost 99 cents.

    Tonight the same quart cost $1.48.

    That is a 33 percent increase in a staple food item in less than 12 months.

  30. Joe Schmoe commented on Oct 23

    Guys, get over it. Greenspan didn’t say anything anyone who has ever studied economics doesn’t already know, and while Stewart got a few laughs in, his questions were sophomoric at best.

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