You Know What Just Occurred to Me About Alan Greenspan?

[On the Road]

He's leaving in January.

Of all the things you can say about Greenspan, he has a good track record as a technician and a fine-tuner. The last 18 years have seen a couple of mild recessions but inflation has been low and growth has been steady. Every time I can think of where I questioned his reading of the economic tea leaves, he turned out to be right.

Now, Bush will name his successor. If the past is any indication, it will be a hack loyalist. That is NOT good news for the economy. Fed Chairman is a very difficult job to do well. It is no place for incompetence. I do not look forward to this.

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Greenspan faces rough waters

WASHINGTON (Reuters) - Far from coasting into his place in history, Federal Reserve chief Alan Greenspan must spend the waning months of his tenure parsing unusual signs that have analysts warning variously of a dangerous economic slide or a risk of an inflationary overheating.

s forecasts for the U.S. economy's path -- and Fed interest-rate policy -- diverge, experts keep up their warnings about potentially destabilizing economic imbalances.

Greenspan, due to step down in January after 18 years at the Fed's helm, will have a chance Thursday in congressional testimony to clear up confusion over how he will try to navigate safely through the shoals.

http://news.yahoo.com/s/nm/20050608/pl_nm/economy_greenspan_dc_3

[LoZoccolo]

1. Yep.

The whole issue of who the Federal Reserve Chief is might be over most peoples' heads, which at best will keep the issue out of the general public eye enough for Bush* to do whatever he wants there, and at worst will allow the Republicans to say whatever they want about the direction of the Federal Reserve and have tons of people parroting it without even knowing so much as what they're talking about.

I subscribe to Investor's Business Daily, whose editorial page is probably worse than the Wall Street Journal because it tends to have that sort of juvenile right-wing tone to it rather than one that would appeal to smart people. Already it seems like their ragging on Greenspan. From today's issue:

"Greenspan has been the chairman of the Federal Reserve since August 1987, and his style has always been to raise the fed funds rate until he causes some crisis, or until the economy goes into a stall, and then very quickly ease again," wrote Don Hays, a veteran market strategist and head of HaysAdvisory.com, in a recent note to clients. The 1995-2000 period was the only time when rates weren't being ratcheted up and down in a wide band.

http://www.investors.com/editorial/feature.asp?v=6/8

[On the Road]

2. Arthur Burns Used to Stimulate the Economy in Election Years

so he would win favor with the incumbent and get reappointed. That's the kind of behavior we don't need.

I'm sure IBD is all gung-ho about growth and hates interest rate hikes. They're just conveniently forgetting double-digit inflation.

[JDPriestly]

3. He tightened interest rates too much in

I think it was late 1999 or 2000. I remember discussing that with someone around that time, but I don't remember exactly what month or season.

[indepat]

4. Greenspan will be remembered for scuttling social security to fund tax

cuts for the most affluent, those who have generally paid payroll taxes on but little of their income: a political hack extraordinaire IMNSHO.

[On the Road]

7. I Don't Think His Name Will be Associated with Those at All

Seeing that his job is monetary policy.

[indepat]

8. His job should not including lying about the impact of ruinous tax cuts

which he says should be funded by drastically reducing social security benefits, but sticking their noses where they don't belong and lying about it are what political hacks do best.

[BillZBubb]

5. Greenspan is a Repug, right wing hack.

Always has been. He's actually been a pretty bad Fed chairman. He sure loved to raise rates when Dem incumbents were up for reelection. And he cut them to the bone for Chimpy.

His advice to Congress has bordered on the totally irresponsible. With Dem presidents, it's "balance the budget". With Repug presidents it's "we can afford those tax cuts".

He's a piece of crap. Good riddance. Not that Bush will appoint anyone better, maybe just more transparent to the sheeple.

[On the Road]

6. He Raised Interest Rates Before the 1992 Election Also

Bush Sr was mad at him for that.

In retrospect, it looks like the 1999 rates hikes may have been too much. But a soft landing is tricky to engineer.

As far as tax cuts go, that' not his job. I'm interested in his performance as Fed Chairman. And the country could have done a lot worse.

[BillZBubb]

13. Bullshit!

Fed Funds Rate (Monthly):

11/1991 4.81
12/1991 4.43
01/1992 4.03
02/1992 4.06
03/1992 3.98
04/1992 3.73
05/1992 3.82
06/1992 3.76
07/1992 3.25
08/1992 3.30
09/1992 3.22
10/1992 3.10
11/1992 3.09

Does that look like he raised rates to you? Sounds like Freeper talking points to me.

[On the Road]

24. Thank You for the Correction

I actually thought what it was pretty commonly accepted that Greenspan hurt Bush Sr's chances in 1992, but I misstated the timing.

You remember the 1992 elections, right? Do you remember how angry Bush Sr was at Greenspan? He blamed his loss partly on the fact that the economy had not come out of recession earlier due to Greenspan keeping interest rates so high. I believe Bush felt that Greenspan should have used monetary stimulation a little earlier in order to have a noticeable effect by the election.

Here are a couple of references right off the top of the search engines:

Bush's father blamed Greenspan for contributing to his defeat in 1992 by failing to cut interest rates quickly enough to generate a strong recovery before voters went to the polls.

The earlier Bush administration certainly tried to pressure the Fed to speed up its interest rate reductions in the year leading up to the 1992 election. At one point, Nicholas Brady, Bush's Treasury secretary, grew so annoyed with Greenspan that he abruptly cut off his weekly meetings with the Fed chief.

Such an effort was nothing unusual in the long history of often strained relations between the White House and the Federal Reserve.

http://www.signonsandiego.com/news/politics/20040815-0954-fed-politics.html

And:

However, inflation stood at a 'horrific' 3.1 percent and Mr. Greenspan was worried. He mercilessly cranked interest rates up from 6.7 percent in 1987 to 9.2 percent in 1989. The economy continued to grow for a while, but by 1991 unemployment began to rise, and reached a peak of 7.5 percent of the labor force in 1992.

The rest of the story is history, and thanks to the recession so was George Bush in the 1992 election. Past experience suggests it takes about two years for Mr. Greenspan's policy maneuvers to slow our economic ship of state. However, it's not too late for him to do damage this time.

http://economicpolicyinstitute.org/webfeatures/viewpoints/greenspan_appnt.html

(I know I said I put you on ignore, but I wanted to reply since you posted data. I appreciate that.)

[leesa]

20. Out. of. touch.

[fob]

9. I'm also amazed at what positive press that worthless hack gets from

all sides. His politicization of the interest rate process was/is way transparent.

His only saving grace is that bush* WILL appoint someone WORSE to take his place.

[Zen Democrat]

10. Are you kidding? He enthusiastically supported the billionaire tax cuts .

Claimed it would stimulate jobs, jobs, jobs. He's a dried up old political hack masquerading as an economic guru. He does what he's told. Good riddance Greenspan.

Whoever Bush puts in at the Fed will have a dismal job.

[On the Road]

11. His Job is To Manage Monetary Policy

Brad deLong cited six instances where he thought Greenspan was off track and reading the numbers wrong, and each time he had to admit that his own projections were the ones that were off. I've had a couple of those experience myself.

I don't care as much what tax opinions he has. I'm very concerned that Bush will appoint something who really doesn't know what he's doing.

To take an extreme example, in the early years of the depression, the Fed contracted the money supply by about 30%. That was misguided, to say the least, and it ruined any hope of a recovery. The Fed can do great damage if it's not run well.

[BillZBubb]

12. Your position is NAIVE!

The Fed chairman may OFFICIALLY be only responsible for monetary policy, but his advice on other issues carries HUGE weight.

Since Monetary policy is closely intertwined with Fiscal policy, Trade policy, and job creation, etc. what the Fed chairman says on those issues is often enough to turn the tide of public perception.

Greenspan has been nothing but a pimp for right wing economics. You are totally wrong in your assessment of him and his character.

[On the Road]

17. You're On Ignore, Oyster §

[AirAmFan]

14. Greenspan ALWAYS was a hack. He was Reagan's 'roadie' economist

during the 1980 campaign. He actually DRAFTED REAGAN'S 'TAX CUT' CAMPAIGN SPEECHES!

And you give him WAY too much credit for economic competence. His main asset always has been his ability to suck up to the very powerful. Greenspan was a grad school DROPOUT when his extremely powerful mentor Arthur Burns got Greenspan appointed to Ford's Council of Economic Advisers.

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DETAILS

From a new book by Ravi Batra (the economist who coined the phrase "jobless recovery") at http://www.palgrave-usa.com/batra/batra.pdf :

"Greenspan first came into the national limelight when President Gerald Ford appointed him as the chairman of the Council of Economic Advisers (CEA) in 1974. Greenspan did not even have a Ph.D. at the time; nor had he penned anything pioneering to earn the recognition of his peers; yet he was able to rise to a position normally held by star economists.... Greenspan�s main credential in 1974 was his intimate friendship with then…Fed chairman Arthur Burns, who recommended his pal to the recently vacant position at the CEA. Burns was once a professor at Columbia University, where Greenspan enrolled for his doctorate from 1950 to 1952. The pupil and the teacher grew close because of their ideological affinity. But Burns was an eminent economist, renowned for his seminal work on the business cycle, whereas Greenspan dropped out of school after two years of laborious night classes....

Despite their differences, the two grew so close that Greenspan even held the first mortgage to Burns�s home in Washington in 1970, playing the role of a banker. When he was nominated as Fed chairman to become the world�s foremost banker, this type of relationship proved more important than his meager banking experience. ... Thus it can be argued, favoritism, not merit, nor genius, started Greenspan off to political prominence that eventually took him to stardom."

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And from the historical book, "The Triumph of Conservatism", at http://www.thirdworldtraveler.com/Democracy_America/TriumphConservatism_POAD.html :

"Before the I978 election, business lobbies and corporate political action committees had tended to divide their contributions equally between Democrats, the incumbent party, and Republicans, the more probusiness party. But in that election, PAC contributions began to shift toward Republicans. ... As the I980 elections approached, business leaders and PACs decided to cast their lot with the Republicans, but for the presidential nomination they were still leery of supporting a full-blown conservative like Ronald Reagan. Most business leaders had backed Gerald Ford against Reagan in the 1976 primaries. In 1980 they backed either John Connally or George Bush against Reagan. They doubted the seventy-year-old Reagan's competence as a chief executive. ... (But) once it became clear in the spring of I980 that Reagan had sewn up the nomination, the Californian and business leaders began to move closer to each other.

Reagan formed a policy council chaired by George Shultz and including Alan Greenspan, Ford's chair of the Council of Economic Advisors, Burns, Simon, McCracken, and Walker. He asked Greenspan to draft his speeches and to accompany him during the campaign.

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The economists and former economic officials provided legitimacy for Reagan's promise that he could raise defense spending, cut taxes, and still balance the budget. In September they would conceal their own doubts as they stood behind him as he introduced a highly implausible plan for balancing the budget by I983. (Arthur Burns told Herbert Stein that he endorsed the plan because "if you dissented from it, your whole usefulness in the organization was lost.") Reagan also created a forty-member business advisory group that included CEOs and chairmen from many of the top banks and Fortune 500 corporations. Sensing that they would get much of what they wanted from his administration, the business leaders lent their support.

Once in office, President Reagan fulfilled business's fondest wishes. Reagan's tax program included the supply-side cuts, but it also featured a set of generous business tax cuts devised and lobbied for by Walker, whom Reagan had put in charge of his transition team on tax policy. Administration members who imagined they could defy their business allies got a rude awakening. Reagan's budget director David Stockman thought he could modify Walker's proposed cuts for business in order to make room for other cuts. But he discovered business's power on K Street: "Within days . . . Walker, the Chamber of Commerce, and most of K Street would come at us like a battalion of tanks. The firing lasted four days, then abruptly stopped. Walker got everything he wanted." Some of Walker's cuts were so egregious that they had to be repealed the next year when Robert Mclntyre of Citizens for Tax Justice revealed that they were allowing some large and profitable corporations to pay no taxes at all."

[Old_Fart]

15. The chimp will probably pick his bank robbing brother Neil Bush

:spray:

[On the Road]

16. That's Exactly the Kind of Thing I'm Afraid of

[Ikonoklast]

18. From the frying pan into the fire

D-uhblyoo will appoint someone that will "fix" our deficit, "fix" job creation, "fix" economic growth, "fix" tax policy. Don't you see that this is their favorite word now? They are going to "fix" our nation until it so broken that it will take generations to repair. Probably appoint a jerk like Bolton that will "fix" economic policy like he wants to "fix" the UN.

[leesa]

19. Inflation has been low? What planet are you living on?

[RUMPLEMINTZ]

21. Inflation is at

3.51%, a litlle higher than the last few months but not all that bad. Here is a historic chart.

http://inflationdata.com/Inflation/Inflation_Rate/HistoricalInflation.aspx?dsInflation_currentPage=0

[On the Road]

23. I'm Living on the Same One I Did in the 70s

if you experienced double-digit inflation over a period of years, you would know the difference.

[rman]

22. And the income gap has widened

The already filthy rich got a lot richer while the poor got poorer still and "middle class" has become a hollow phrase (living one month's salary away from bankrupcy).

For all i know Greenspan has spoken the truth once:
"Deficit spending is simply a scheme for confiscation of wealth"

[July]

25. And he looks like the Six Flags dancing geezer.

Only uglier.

[On the Road]

26. Oh, Man, That Would Make a Great Photoshop

or video clip. Something about "irrational exuberance."

[Jeff In Milwaukee]

27. In what parallel universe are you living?

Greenspan spent the 1990's obsessed about inflation and cranking up interest rates every time the economy started looking better (fuck workers and their inflation-eroded salaries -- we have to protect the bond market). He tut-tutted the stock market bubble instead of making it an issue -- until the bubble burst. And then he went to Congress and told them that Bush's tax cuts were just the tonic that the economy needs. A few trillion in new debt later, and now he's warning about deficits.

I would be hard-pressed to name any previous Federal Reserve Chairman who has been more uniformly and disastrously wrong that Alan Greenspan.

[Erika]

28. Greenspan said he backs tax cuts Only if the paygo

system is used. Which means your bills can't exceed your income.

This system is very evidently not in use.