Is Alan Greenspan to Blame for the Bubbles?

Yesterday, commenter Gian Paul suggested that Lehman Brothers CEO Richard Fuld is being singled out unfairly as a scapegoat for Wall Street’s woes.

As I noted in my post yesterday, Fuld may be the poster boy for the Street’s greed, but the angry mob may have a bigger fish to fry: Pisces Alan Greenspan, who served as chairman of the Federal Reserve for 18 years.

Greenspan’s tenure (1987-2006) coincided with two bubbles — one in Internet stocks and the other in real estate. The bursting of the real estate bubble is the trigger for the current financial crisis. Here’s Greenspan’s chart, courtesy of Astrodienst.

It’s set for noon on March 6, 1926 in New York because the time of birth is unknown. Interesting that the Father of Easy Money has a generous Venus/Jupiter conjunction in Aquarius broadly opposed by bubble-oriented Neptune in Leo.

As Neptune in Aquarius was transiting his Venus/Jupiter combo in technology-oriented Aquarius, Greenspan became besotted with the idea that tech had created massive improvements in productivity that were not being reported in the official figures. This gave birth to the notion of the New Economy.

Of course, who could blame Greenspan for not recognizing that the Internet would give us new ways to waste time, say by watching Tina Fey’s imitation of Sarah Palin on Saturday Night Live via You Tube? While we’re on that topic, wasn’t Queen Latifah awesome in her spoof of Gwen Ifill?

(BTW, You Tube has taken the Fey debate video down, citing copyright issues by NBC Universal, which airs SNL. Guess we’ll have to do some work today.)

Anyway, I’ve been reading a trenchant indictment of Greenspan by William Fleckenstein called Greenspan’s Bubbles: The Age of Ignorance at the Federal Reserve that accuses him of self-delusion in his memoir The Age of Turbulence. Can you imagine: a Pisces guilty of self-delusion?

Other than the house of cards collapsing on Wall Street, what’s behind the attacks on Greenspan’s legacy? Saturn in Virgo is currently opposing his natal Sun.

So what if Greenspan didn’t do his duty as Fed chairman by taking away the proverbial punch bowl before the party got too wild? Well, we’re waking up to a massive hangover, in this case once deferred if Greenspan’s critics are correct in their allegation that he dealt with the bursting of the dot-com bubble by creating another bubble in real estate. So consider it a double-whammy of a hangover.

If you’re interested in this school of thought, check out The Mess That Greenspan Made, a blog that blames the former Fed chairman for just about everything, except perhaps childhood obesity.

Since I wrote this post, The New York Times has published an article questioning Greenspan’s laissez-faire attitude toward derivative instruments. The heat is on.

Sorry, Mr. Greenspan, I think I’m going to file this post under “Fallen Heroes.”

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3 comments on “Is Alan Greenspan to Blame for the Bubbles?

  1. Monica – I have read Greenspan’s book in Portuguese (subtitle: Adventures in a New World): Well, now we have it, that new world “of the unexpected, unexplained, and somewhat awesome future.” My words, not Greenspan’s.

    I once met with the Maestro, back when he was an economic consultant. I thought he was an interesting person, though he talked a bit too fast for my understanding of English. Gerald Ford was President back then.

    The Maestro managed to be chairman of the Fed for 18 years. He’s earned my respect for that. Here in Brazil the average duration of the central bank president is not longer than a year and a half.

    Another point in favor of Chairman Greenspan: The Dow Jones industrial average, if memory serves me correctly, more or less quintupled in value during his tenure. Admittedly, there were some ups and downs, but Pisces Greenspan had the intuition to warn his audience.

    Why should he now be a scapegoat? That’s simply not fair! If the market was up so nicely for many years, and brought good feelings for so many people, that’s destiny, collective destiny, if you like.

    Central bankers such as Arthur Burns, Milton Friedman, Paul Volcker, and Greenspan in my view are all “employees of destiny.” Some are more efficient than others.

    There’s no doubt that Greenspan was a good one. If not he would not have lasted for 18 years and helped enrich America as much as he did! — Gian Paul

  2. I would argue that Greenspan was responsible or at partly responsible for at least four bubbles. That is, back in the day, there was a stock market bubble (and a crash), the money moved to real estate (S&L bubble), then to bonds, and then back to stock (dotcom) and then back to real estate again.

    The overarching idea is that this is not a sequential series, but one very large bubble with a various side bubbles. The large bubble being driven by stocks, first and foremost, because for the last twenty years, total market cap has been consistantly over 100% of GDP, even though historically, market cap never got over much over 90%, including in 1929.

    Strictly speaking, I’d say the whole thing was actually a credit bubble. And that is Greenspan’s fault. I don’t know about the rest of it (and I don’t care either).

    max
    [‘Easy Al: King of Free Money.’]

  3. Greenspan was an Ayn Rand worshiping asshole from day one (excuse my English). He belongs at the end of a rope for all the damage he’s done, but I doubt that will be happening unless those Zero Dollars in the post above really do become true.

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