Given our earlier discussion of the former Fed Chair, today’s Quote of the Day is particularly apt. It comes from Dresdner Kleinwort researcher Albert Edwards, who is also a former Bank of England employee. Edwards, apprently, is no friend of Easy Al:
“With the retirement of Alan Greenspan from the Fed, I really thought I could move on. It was hard work heaping scorn and ridicule on the man who had, in my view, presided over the most grotesque period of economic mismanagement in living memory. But why the indecent rush to cash in? Isn’t it obvious? He mightn’t have long before his Ponzi scheme collapses. Better cash in quickly before it does…
I still remember with acute embarrassment one client lunch, when an analyst colleague was presenting. Unfortunately, he inadvertently propelled some half eaten food across the table and it landed in the beard of a client who was sitting opposite. Luckily the client himself didn’t seem to notice, or maybe he was just too polite to say or do anything. So Alan, my advice is however much of a mess you think you are making, just keep on going and hope no-one notices. It will be no different then from the Fed really!”
Ouch! . . .
>
Hat tip: Bill King
>
Source:
DKW Research
Dresdner Kleinwort
http://www.dresdnerkleinwort.com/eng/research/index.php
OK, this guy Edwards is an idiot. I’m no super fan of Alan Greenspan, but one only needs to look at the reign of Arthur Burns at the Fed in the 1970’s to see a true example of gross mismanagement of our money supply. Greenspan was a freakin’ genius compared to that guy.
The Fed lost control of the situation years ago and are now loathe to do anything. They just pretend that what is going is normal. The reality is that we move from one bubble to the next. However, the refusal by asia to allow the CA deficit to start to narrow is making the private sector take silly risk in order to find yield/
It is unfair to blame only Greenspan. Reagon started gigantic twin deficits. Wallsteet created many of the fundamental structrual problems existing today (such as ballooning markets for subprime, junk debt, and complex derivatives). More money has been spent on military than education. Greenspan only influenced interest rate.
All Easy Al did was read the newspaper. Iran will be attacked by summer sending the oil markets hyperbolic, so don’t go wobbly now, even though Al is a contrary indicator. The event that kills the internatiomal liquidity party is straight ahead and it’s no secret to Israel, the U.S. or Iran. The question is how and exactly when……….Anyway, an insuirmountable wall of debt is dead ahead which will start to drain vitality from the economy, though that might be a few years out so that puts me close to the Michael Panzer camp.
I am growing a bit tired of the Alan Greenspan bashing.
During his reign unemployment fell nearly 200bp below the prevailing economic view of what a non-inflationary economy could absorb.
After 9/11, we faced the immediate prospects of a full blown depression as terrorism, SARS and the a “tulip crazed” stock market bubble converged to create a perfect storm of risk aversion.
Greenspan took immediate and bold action to lower interest rates to historic levels, preventing permanent damage to the economy.
Further these actions finally ignited the global economy by lowering real interest rates everywhere prompting investors to seek higher returns and ship capital to emerging markets.
While there were without doubt excesses, more people have achieved the “American Dream” of home ownership then ever before in history.
Greenspan encouraged new financial products to spread risk and put the global economy in a better position to withstand future shocks.
Today we are operating at full employment and rising incomes. Corporations have repaired their balance sheets and are in a very strong position to weather an economic downturn.
Is there fallout from these actions that will have to be worked out over the upcoming months? Yes
Are there risks that the excesses in speculative investment will bring about a period of stagnation and possibly even a recession in the near future? Yes
Is our economy and our quality of life better today and over the long haul because of Greenspan’s quick and decisive actions?
Without a doubt!
“Demain sur l’autel des dieux tu brûleras ce qu’hier tu as adoré.”
(Athali) Racine 1691
“Tomorow in the gods’s temples you will burn what you loved yesterday”
Written in the 17th century and valid for ever.
Greenspan always takes the blame for the BOJ’s decade of free money policy.
Maybe Barry Ritholtz should rename his blog site “The Big Picture in God’s Temple”.
Attempts at humor aside, this is an excellent site. I spend way too much time reading Barry’s observations and (for the most part) astute reader comments.
Sneath,
…Agreed.
However, let’s understand that his mission was structurally impossible, because the Fed can not be held responsible for failed monetary policy that is all but politically mandated by a government that has too high a regard for monetarism, and, also politically, will not easily suffer any downturn in asset prices.
Now now…everyone knows central bankers are evil…but no need to pick on an old man…
and war with Iran in my book is stimulus. I reckon it’s just what we need.
Poor old Al. There is no respect, even near death. Has he been prone to being political to advance his career? Who hasn’t? Has he made some mistakes? Who hasn’t? Did he create the bubble in 2000? No. Did he contribute to it? Possibly and maybe probably. Did he keep rates too low for too long post 2000? Maybe. But, if he didn’t, everyone writing on this board might be in a soup line.
Because regardless of what he did or didn’t do, this economic expansion has been liquidity driven. So, without it, the situation would likely be just as ominious. Or, maybe we’d finally be coming out of it rather than entering phase two.
But, who had more to do with it than anything? Wall Street. Just like 1929. Where’s the ridicule of your peers? Ah, I forgot. We are all political in our attempt to eek out a living.
I’m not surprised by the comments because we all have our peeves and like to vent or chat it up at times. But, I’m shocked that a firm such as DKW would allow an employee to represent such unprofessional and distasteful views on company letterhead. It’s despicable and grounds for a reprimand demanding a public apology. That is, if the firm has any integrity.
Quite frankly, if I were running DKW, that employee might be in the soup line without a very rapid and clear apology.
More from Easy Al and why he is an idiot.
Al, who said:
“Innovation has brought about a multitude of new products, such as subprime loans and niche credit programs for immigrants. . . . With these advances in technology, lenders have taken advantage of credit-scoring models and other techniques for efficiently extending credit to a broader spectrum of consumers. . . . Where once more-marginal applicants would simply have been denied credit, lenders are now able to quite efficiently judge the risk posed by individual applicants and to price that risk appropriately. These improvements have led to rapid growth in subprime mortgage lending . . . fostering constructive innovation that is both responsive to market demand and beneficial to consumers.”