Best of the Week
Most Popular
1. Investing in a Bubble Mania Stock Market Trending Towards Financial Crisis 2.0 CRASH! - 9th Sep 21
2.Tech Stocks Bubble Valuations 2000 vs 2021 - 25th Sep 21
3.Stock Market FOMO Going into Crash Season - 8th Oct 21
4.Stock Market FOMO Hits September Brick Wall - Evergrande China's Lehman's Moment - 22nd Sep 21
5.Crypto Bubble BURSTS! BTC, ETH, XRP CRASH! NiceHash Seizes Funds on Account Halting ALL Withdrawals! - 19th May 21
6.How to Protect Your Self From a Stock Market CRASH / Bear Market? - 14th Oct 21
7.AI Stocks Portfolio Buying and Selling Levels Going Into Market Correction - 11th Oct 21
8.Why Silver Price Could Crash by 20%! - 5th Oct 21
9.Powell: Inflation Might Not Be Transitory, After All - 3rd Oct 21
10.Global Stock Markets Topped 60 Days Before the US Stocks Peaked - 23rd Sep 21
Last 7 days
Silver Long-term Trend Analysis - 28th Nov 21
Silver Mining Stocks Fundamentals - 28th Nov 21
Crude Oil Didn’t Like Thanksgiving Turkey This Year - 28th Nov 21
Sheffield First Snow Winter 2021 - Snowballs and Snowmen Fun - 28th Nov 21
Stock Market Investing LESSON - Buying Value - 27th Nov 21
Corsair MP600 NVME M.2 SSD 66% Performance Loss After 6 Months of Use - Benchmark Tests - 27th Nov 21
Stock Maket Trading Lesson - How to REALLY Trade Markets - 26th Nov 21
SILVER Price Trend Analysis - 26th Nov 21
Federal Reserve Asks Americans to Eat Soy “Meat” for Thanksgiving - 26th Nov 21
Is the S&P 500 Topping or Just Consolidating? - 26th Nov 21
Is a Bigger Drop in Gold Price Just Around the Corner? - 26th Nov 21
Financial Stocks ETF Sector XLF Pullback Sets Up A New $43.60 Upside Target - 26th Nov 21
A Couple of Things to Think About Before Buying Shares - 25th Nov 21
UK Best Fixed Rate Tariff Deal is to NOT FIX Gas and Electric Energy Tariffs During Winter 2021-22 - 25th Nov 21
Stock Market Begins it's Year End Seasonal Santa Rally - 24th Nov 21
How Silver Can Conquer $50+ in 2022 - 24th Nov 21
Stock Market Betting on Hawkish Fed - 24th Nov 21
Stock Market Elliott Wave Trend Forecast - 24th Nov 21
Your once-a-year All-Access Financial Markets Analysis Pass - 24th Nov 21
Did Zillow’s $300 million flop prove me wrong? - 24th Nov 21
Now Malaysian Drivers Renew Their Kurnia Car Insurance Online With - 24th Nov 21
Gold / Silver Ratio - 23rd Nov 21
Stock Market Sentiment Speaks: Can We Get To 5500SPX In 2022? But 4440SPX Comes First - 23rd Nov 21
A Month-to-month breakdown of how Much Money Individuals are Spending on Stocks - 23rd Nov 21
S&P 500: Rallying Tech Stocks vs. Plummeting Oil Stocks - 23rd Nov 21
Like the Latest Bond Flick, the US Dollar Has No Time to Die - 23rd Nov 21
Cannabis ETF MJ Basing & Volatility Patterns - 22nd Nov 21
The Most Important Lesson Learned from this COVID Pandemic - 22nd Nov 21
Dow Stock Market Trend Analysis - 22nd Nov 21
UK Covid-19 Booster Jabs Moderna, Pfizer Are They Worth the Risk of Side effects, Illness? - 22nd Nov 21
US Dollar vs Yields vs Stock Market Trends - 20th Nov 21
Inflation Risk: Milton Friedman Would Buy Gold Right Now - 20th Nov 21
How to Determine if It’s Time for You to Outsource Your Packaging Requirements to a Contract Packer - 20th Nov 21
2 easy ways to play Facebook’s Metaverse Spending Spree - 20th Nov 21
Stock Market Margin Debt WARNING! - 19th Nov 21
Gold Mid-Tier Stocks Q3’21 Fundamentals - 19th Nov 21
Protect Your Wealth From PERMANENT Transitory Inflation - 19th Nov 21
Investors Expect High Inflation. Golden Inquisition Ahead? - 19th Nov 21
Will the Senate Confirm a Marxist to Oversee the U.S. Currency System? - 19th Nov 21
When Even Stock Market Bears Act Bullishly (What It May Mean) - 19th Nov 21
Chinese People do NOT Eat Dogs Newspeak - 18th Nov 21
CHINOBLE! Evergrande Reality Exposes China Fiction! - 18th Nov 21
Kondratieff Full-Season Stock Market Sector Rotation - 18th Nov 21
What Stock Market Trends Will Drive Through To 2022? - 18th Nov 21
How to Jump Start Your Motherboard Without a Power Button With Just a Screwdriver - 18th Nov 21
Bitcoin & Ethereum 2021 Trend - 18th Nov 21
FREE TRADE How to Get 2 FREE SHARES Fractional Investing Platform and ISA Specs - 18th Nov 21
Inflation Ain’t Transitory – But the Fed’s Credibility Is - 18th Nov 21
The real reason Facebook just went “all in” on the metaverse - 18th Nov 21
Biden Signs a Bill to Revive Infrastructure… and Gold! - 18th Nov 21
Silver vs US Dollar - 17th Nov 21
Silver Supply and Demand Balance - 17th Nov 21
Sentiment Speaks: This Stock Market Makes Absolutely No Sense - 17th Nov 21
Biden Spending to Build Back Stagflation - 17th Nov 21
Meshing Cryptocurrency Wealth Generation With Global Fiat Money Demise - 17th Nov 21
Dow Stock Market Trend Forecast Into Mid 2022 - 16th Nov 21
Stock Market Minor Cycle Correcting - 16th Nov 21
The INFLATION MEGA-TREND - Ripples of Deflation on an Ocean of Inflation! - 16th Nov 21

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

Greenspan's Incessant Contradictory Ramblings

Economics / Liquidity Bubble May 27, 2008 - 08:04 AM GMT

By: Brady_Willett

Economics Best Financial Markets Analysis ArticleIn yet another attempt to defend his legacy, Greenspan resorts to semantics and outrageous contradiction ( FT Article ). On the topic of asset ‘bubbles' – which Greenspan preferred to completely ignore as they acquired air and help reflate after they burst – he asked the following:

“Is there a bubble today in food, energy, gold, currencies?  If so, what specifically should we do about it?”

With all due respect Mr. Greenspan, the more appropriate question is whether or not Fed policies play a role in determining today's food, energy, gold and currency prices.  The answer to this question is, of course, yes – when you combine many years of easy/reckless money policies with regulatory neglect you encourage speculation not only in stocks and real estate (as seen during Greenspan's tenure) but also commodities and currencies. Distill a degree of control at the Fed and the financial markets would surely trade less wildly out of control.

This is not to avoid Greenspan's question. After all, it is easy to play along:

In order to combat the ‘bubble' in commodity prices, if indeed there is one, you force the CFTC to produce completely transparent COT information on a daily basis, you immediately stop pension funds from investing in commodities, you close the ‘swaps loophole' and/or force all speculators to face position limits (See Masters, PDF ), and you trot Bernanke and every other major central bank out once a day to explain that commodity prices do not reflect the fundamentals.  Within a week the commodities bubble, if indeed there is one, would be busted.

Next, in order to combat the bubble in ‘currencies' (perhaps Greenspan should specify exactly which currency he means – wink, wink), you abolish the Federal Reserve.  Failing this seemingly extreme measure, you reinstate Volcker as Fed boss and within an hour the currency markets are dealt a deathblow of calm because the dollar bottom is in…

These are some basic ideas to counteract the bubbles Greenspan asks about. Surely there are many more.  Incidentally, what didn't come to mind when Greenspan asked the above question is ‘keep the printing pressing going full tilt, do absolutely nothing on any regulatory level, and cut interest rates like a madman when you hear a pop.'

After his regular bubble fare, Greenspan turned to discussing the credit crisis with the following:

Mr Greenspan said the most sensible thing to do was “to increase the capacity of our financial institutions to absorb shocks in general. That means more capital”.

He said the market was already demanding higher capital on the part of financial institutions in the wake of the crisis. Regulators should allow this market-led process to run its course before deciding to what extent to raise regulatory capital.

But it would in principle make sense to vary the amount of regulatory capital that banks needed to hold at different stages of the economic cycle, he said.

“I have always been in favour of counter-cyclical capital requirements,” Mr Greenspan said. “There are virtually no bad loans made at the bottom of the cycle. The bad loans are all made at the top.”

Mr. Greenspan, am I reading your words correctly?  Are you suggesting that regulators should alter bank capital requirements at different stages of the economic cycle? Did you really say “I have always been in favour of counter-cyclical capital requirements'???  Seriously, are my eyes deceiving me? 

In case whatever medication Greenspan is on hinders him from comprehending written text, please find someone to scream this into his best ear: RAISING RESERVE/CAPITAL REQUIREMENTS IS EXACTLY WHAT YOU SHOULD HAVE DONE AS THE SUBPRIME MANIA TOOK ROOT!!!

(Incidentally, as anyone paying attention will have no doubt surmised, Greenspan answered his own question about bubbles with ‘counter-cyclical' regulatory measures).

Every Sentence A Fascinating Contradiction

Mr. Greenspan now believes that counter-cyclical efforts should be undertaken by regulators because, as we all know, bad loans are made during the best of times. However, Greenspan apparently also still believes that regulators should keep their grimy paws away from any form of regulation and that it is impossible to accurately recognize anything resembling a ‘top' (or ‘bubble' nowadays).

For the record, Greenspan cut reserve requirements on banks twice during his tenure (December 1990 and April 1992), and he never raised banking reserve requirements or margin rates. He also failed to adopt any regulatory pressure to try and counter one of the biggest housing manias in U.S. history, even though his peers warned of widespread fraudulent lending practices and housing prices were being bid up to insane levels with the help of many blatant ‘bad loans'. And still the confusion gets worse:

On the regulatory side, “I have no doubt that we can very effectively quash a bubble,” he [Greenspan] said. It was a question of the costs involved. “What price do you pay in terms of suppressed economic activity?”

But Mr. Greenspan, I thought bubbles were only identifiable after they burst?  How do you ‘very effectively quash' what can not be seen? Have you been lying to us all these years or is this just another of your many innocent contradictions?  Last but probably not the last we hear from him:

The former Fed chief said he would be “fully supportive” of “leaning against the wind” with interest rates when asset prices are rising rapidly if someone could provide a credible framework for doing so. But he said: “I have just not seen any evidence that it is feasible.”

Is the man whose policies, or lack thereof, have helped push the U.S. financial markets to the edge of destruction really going down the ‘evidence' and ‘feasible' path?  What, Sir Alan, feasibility study were you adhering to when you allowed financial players to take the Fed hostage and put the entire financial system at risk?  What ‘evidence', dear sir, did you draw upon to conclude that all financial market history needed to be erased because of your twisted desire to see the markets self regulate (was not the Fed brought to life because of the supposedly dire need to more efficiently regulate money?)

In short, rather than incessantly romanticize about a dreamy anti-bubble handbook we all know doesn't exist, why doesn't Greenspan be honest and admit that he messed up?  However hard he tries, Greenspan is not going to convince anyone that his tenure as Fed boss is to be adored by future generations like a Picasso.  Rather, the appropriate portrait is that of a lazy regulator that loved to throw a party, and whose cantankerous contradictions after leaving the Fed dumbfounded all.

By Brady Willett was launched in January of 2000 with the mandate of providing an alternative opinion on the U.S. equity markets.  In the context of an uncritical herd euphoria that characterizes the mainstream media, Fallstreet strives to provide investors with the information they need to make informed investment decisions. To that end, we provide a clearinghouse for bearish and value-oriented investment information, independent research, and an investment newsletter containing specific company selections.

Brady Willett Archive

© 2005-2019 - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


29 May 08, 11:09

And he's ugly too !

Ron Holland
03 Jun 08, 20:23
Abolish the US FED

The Federal Reserve is part of the problem not the solution!

Sign and forward our Abolish the Federal Reserve Petition at to all your pro-freedom friends and associates. The collapsing dollar, falling housing market, the subprime mortgage and growing credit crisis and stock market weakness are all a result of earlier Federal Reserve actions designed to maximize Wall Street and banking profits at the expense of productive, working Americans.

Ron Holland, The Swiss Confederation Institute, Wolf Laurel, NC

PS Check out the July Las Vegas FreedomFest Conference

09 Jun 08, 21:10
Time to Abolish the Fed

The Federal Reserve Has Created the Risk of a Global Depression!

Please sign, publish or forward our Abolish the Federal Reserve Petition at to all your pro-freedom friends and associates.

The collapsing dollar, exploding oil and food prices, falling housing market, the subprime mortgage and growing credit crisis and stock market weakness are all a result of earlier Federal Reserve actions designed to maximize Wall Street and banking profits at the expense of productive, working people around the world.

Ron Holland, The Swiss Confederation Institute, Wolf Laurel, NC

PS Check out the July Las Vegas FreedomFest Conference

Post Comment

Only logged in users are allowed to post comments. Register/ Log in