It is the economy stupid
Is the coming 'tightening' of the credit markets, or shortage of liquidity a direct consequence of Alan Greenspans encounter with Ayn Rand? The free markes equal free people advocates that believe free markets are the fulcrum that will bring balance to the world are often heard touting the glory of how unregulated markets are the answer to communism, and despotic tyranny. This ideology is behind Reagonics, Freidmanomics and the surge in privatization.
When Bush Jr. came into office Greenspan indulged in a bit of fantasy, thinking that it was the ideal time to implement his libertarian Republican policies of free markets with fiscal restraint, that would showcase the ideals that have driven his economic policy.
Though Mr. Greenspan does not admit he made a mistake, he shows remorse about how Republicans jumped on his endorsement of the 2001 tax cuts to push through unconditional cuts without any safeguards against surprises. He recounts how Mr. Rubin and Senator Kent Conrad, Democrat of North Dakota, begged him to hold off on an endorsement because of how it would be perceived.
Greenspan Speaks Out
Today, Mr. Greenspan is indignant and chagrined about his role in the Bush tax cuts. “I’d have given the same testimony if Al Gore had been president,” he writes, complaining that his words had been distorted by supporters and opponents of the cuts.
Mr. Greenspan, of course, had been the ultimate Washington insider for years, and knew full well that politicians cited his words selectively to suit their agendas. He was also legendary for ducking delicate issues by, as he once said, “mumbling with great incoherence.”
Of course Mr. Greenspan could have spoken out that tax cuts in a time of war are foolish, but it was supposed to be a quick victory. To compensate the economy he loosened regulations on lending, thus creating the irrational exuberance of the housing bubble, inflating the housing market, enabling easy lending practices, and now we see that a confluence of unscrupulous 'self interested' individuals' have driven the world credit markets into a crises. Man can not be left unattended in his capitalist enterprises, there must be regulation that softens the edges of the human tendency for self centered cheating.
I assert that free markets must have regulation in order to be fruitful. If you just let the markets rule the day you will find a few bad apples will float to the top, and use unscrupulous methods to manuvuer around existing laws. This is what happened in the Home Mortgage Industry. Which is essentially another Silverado Savings and Loan Crises, but this time the 'bad" money has been floated around the world markets.
The financial engineers used bundled mortgage loans, rebundled them as solid equity to lend to investers, but forgot that the whole scam depended on people being able to afford the mortgage. Inflated housing prices in the end is a double edged sword.
I am curious how the libertarian free markets equal free people will react to Greenspans new book, which essentially blasts Bush Jr, and Karl Rove as the culprits that derailed Greenspans libertarian dream. While Bush is trying to protect his own legacy, is Greenspans new book an effort for the Genious of Economics to protect his own?
I think Mr. Greenspan needs to point the finger at himself also. IN his efforts to rid the earth of communism forever, with Ayn Rand's stone hearted free market principles there is a sort of reverse communism occuring.
What good is it for people to own their own homes, if they can't afford to pay for them. What good is the ownership society, if everything that you think is yours is really owned by your debtors.
I am looking forward to how the elite intelligensia that has so promoted Greenspan as the God of economics will react to the retired Fed Chairman's new book.