Alan Greenspan: "The Financial System Is Broke"

Tyler Durden's picture

For the definitive confirmation that the Fed is and has always been very open to, at least philosophically, pushing the market higher no matter what the cost (if not in practice - they would never do that, oh no, Liberty 33 would never stoop so low), is this quote from former Fed chairman Alan Greenspan who was on Meet The Press earlier, where he said the following stunner: "if the stock market continues higher it will do more to stimulate the economy than any other measure we have discussed here." In other words, the Fed's dual mandate of maximizing employment and promoting a stable inflation rate have been brushed aside, and the one and only prerogative for Chairman Ben currently, and for the short and long-term future, is to keep the Dow Jones (because nobody in the administration, even the Fed, has heard about the S&P yet), above 10,000. Yet Greenspan, who now apparently is off the reservation concludes with this stunner: "There is no doubt that the federal funds rate can be fixed at what the Fed wants it to be but which the government has no control over is long-term interest rates and long-term interest rates are what make the economy move. And if this budget problem eventually merges to the point where it begins to become very toxic, it will be reflected in rising long-term interest rates, rising mortgage rates, lower housing. At the moment there is no sign of that because the financial system is broke and you can not have inflation if the financial system is not working." In other words, we will be in deflation until the broke financial system becomes unbroke... and then we will have hyperinflation.

Well, ladies and gentlemen, Q.E.D.


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Everyman's picture

"Good Heavens Ms. Yamamoto, you are beautiful!"

I think he is getting senile.

bonddude's picture

He might have "blinded" but it wasn't by science.

Can you believe this guy has balls to go on TV still?

Bob Sponge's picture

He may just be trying to bring money back to the stock market where it can be fleeced.

Everyman's picture

You are correct sir, but she is still Japanese!



Cojones's picture

Also by Thomas Dolby: Airhead

Pondmaster's picture

My first thought as well before posting reply to this article . And it is not uncommon for negative personal traits to be magnified with senility , or dementia . I think Greenspan suffers from the later , and his once , much more subdued ( hidden) sociopathic tendencies are in full bloom . And so that of his progeny, the eldest son Bernanke , fell right under the tree . 

SuperBull's picture

That is such a negative comment!  I think you are not getting enough.

And your 'frustration' is being 'magnified', as shown here.


Make some good trades, and buy that bottle of viagra!  Geezus!

Mojo's picture

Wow. You've junked 33 times. Got to be a record.

israhole's picture

Benjamin Shalom Bernanke.


I can't believe America can't see what's going on.  

phat tails's picture

I think Americans feel like there is nothing they can do about it.  But it appears that the bloggers are starting to warrant some attention. Maybe this is why the Obamination administration wants the power to regulate and shut down the internet when it sees's funny my library didn't have a copy of Orwell's 1984, when I told the librarian, she was flabbergasted, because our library system is so vast. We got a fresh stock of 'em after much complaining:)  One little triumph at a time!

SuperBull's picture

Healthy man craves... just like health economy that always shoots up.


Our system is broken temporarily, but will be fixed; and viagra will be applied as needed.  Our economy will point upwards for many many years!

Pez's picture

Broken temporarily?! Since 2008? Buddy, I want what you're smoking.

johngaltfla's picture

Try since 2001. They just pumped, dumped, pretended and extended a lot longer than before people tried to wake up and cover up for the waste of such gems as Netscape,, and other .bombs which destroyed the retirements of many a fool.

weinerdog43's picture

Hey!  I take issue w/you lumping in Netscape with  Netscape was a superior browser that was crushed by a monopoly.  Firefox is the direct descendent of Netscape and it is a superior browser over IE. 

Eternal Student's picture

While Netscape was a better browser early on, they were crushed by their own incompetence, not Microsoft. Their management in particular, but also their technical people weren't that great. I personally know a number who worked there. If ever you run into someone with Netscape management on their Resume, run far and fast. They are the definitiion of how not to manage software.

Pez's picture

Yes, 2008 they couldn't contain the beast any longer. LTCM was the foreshadowing. This is what Greensperm and Robber Rubin wanted Brooksley Born to shut her mouth about. These two cretins should hang from the closest lamp posts next to the Cabal of Private Family Banksters... I mean the Fed. See PBS Frontline "The Warning".

whatsinaname's picture

Broken since 1982 -  thats when the 401k programs started. Look at what the Dow has done since 1982 on a linear scale.

ToNYC's picture

Greenspan is like a weak shot of morphine  the PTB put out there to help put out the fire. In fact , he admitted shortly after his retirement that his obtuse proclamations were more like the Wizard of Oz mumbo-jumbo that FDR get real, we'll help. STFU, and I don't want ant of what he's smoking.

A_MacLaren's picture


Our system is broken temporarily, but will be fixed; and viagra will be applied as needed.  Our economy will point upwards for many many years!

You should consider, meditate upon, and bake some cupcakes, while contemplating: Peak Credit, the Kondratiev Cycle, and the credit/debt based fiat monetary system that required ever increasing levels of credit/debt to keep the bubble from imploding upon itself.

Since there are likely new concepts to you, before responding, please review:

Peak Credit:

Kondratiev Cycle

David Knox Barker is considered to be one of the top experts on the Kondratiev Cycle or "Long Wave," as some call it. In a recent interview, he commented that he believes that the K-Winter began in 2000. He also said that he had originally thought that we would reach the bottom of the K-Winter in 2009. However,  he believes that the massive interventions into the financial markets by governments and central banks have had the effect of prolonging and distorting the current K-Winter. He now believes that we will not see the bottom until 2012, and that we will have to have a significant debt crisis (to wash away the excesses of the K-Autumn) before we do reach the bottom.


We do know some things with certainty.  A Kondratiev Winter culminates in a deflationary recession or depression. The excess debts of the preceeding K-Autumn are repudiated and "washed away."  Although we have seen powerful deflationary forces during the past few years, we have also seen massive inflationary counter-measures implemented by governments and central banks.  In addition, instead of allowing the "too-big-to-fail" debtors to go bankrupt, governments and central banks have propped them up and not permitted the bad debts to be purged. In view of this, it is reasonable to say that we will not see the end of the current K-Winter until we have seen deflation gain the upper hand, and until the bad debts are finally extinguished from the economy. It is my current opinion that a logical scenario could be the following: increased inflation, hyperinflation, followed by the deflationary bust.

If this reading is too tough for both of your remaining synaptic nueral connections, maybe an animated education about the nature of money as debt will help:

Money as Debt: (yes I put this link in again, VERY important)


Terra-Firma's picture

Repost from Sat, 07/31/2010 - 22:55

Hungry people are not patient people. Homeless people maybe; but not hungry ones.

People are starting to get hungry folks. This is really happening. The cognitive dissonance created by government's PR machines and market manipulations are stirring anger as a natural response. People will not accept that global wage arbitrage has reduced their price in the open market.

The US standard of living is going to drop by about 1T maybe 2T tops. The real political question for the elites is who to cut off. Their will be winners and losers. Question is who decides? government or the market?

Is US society capable of these political decisions without bloodshed?

The soft Japanese landing won't work in the US. Gun ownership is higher here. Totally different cultures. Lots of business research to justify this reality. So let's not blindly assume that what's happening in Japan will happen in the US. I call BS on this.

I think the US economy will fragment and morf into an economy with pockets of supply chain breakdown inflation; extreme wealth concentrations, and deflation everywhere else.

Ask yourself if government can really pull it off!!!? I call BS on this. The only way to do it without civil war is to let the market decide who wins and who loses and to contain the collateral damage. I've always wanted to use that in a market sense.

phat tails's picture

"Hungry people are not patient people."  There have been a lot of movies about the French Revolution on television, as of late--and hopefully people will start getting ideas about how to deal with the treasonous corruption afoot in this country.  I'm envisioning a re-sharpened guillotine next to the Statue of Liberty.

Blaise Pascal's picture

Hyperinflation before deflation; I agree, sadly.  They have to pump it up, at least one more time.

CBO and OMB budgets are the only thing to follow, longer-term.


grunion's picture

As I grow older (oh, so much older), I find I have less and less tolerance for your brand of arrogance.

The truth is, it is people like you with your manner that is taking humanity into the belly of the beast.

I would like to meet you just to see if in fact you really are as you portray yourself.

DarkMath's picture

SuperBull!!!! You're back man, glad to see you. You should know before you get trashed that ZeroHedge is a haven for Bearish Reality Buffs who don't take kindly to Kool-Aid drinking perma-bulls. I on the other hand like you and find your cock-eyed optimism quaint.

It sounds to me like you've read too many Warren Buffet books and believe in his "be gready when other are fearfull". But you should know a few things in this regard.

1) I am not fearfull rather I am greedy for the Great Clensing that is about to occur. I get up every morning giddy with excitment that this will be the day our false economy is flushed down the toilet. Why? Because I am a patriot and realize our country has been taken over by greedy Wall Street bankers who don't know the meaning of enough.

2) Statistics are rapidly catching up with Warren Buffet. Reversion to the mean lurks like an angel of darkness who lusts to pull his average return back to the norm. On a long enough timeline every money managers return will revert to the mean, and in the case of equities that's around %10. So Buffet has a lot of reality hunting him down these days and I'm glad I'm not in its way.

3) Gold has been the red headed step child of the investment world for a long long time. But that asset too must revert to the mean and that means it has to make up for a lot of neglect over the past 30 years. I'm glad I'm on the Gold bus. So if you're looking for the next killer investment you can stop looking (and don't worry I won't tell Warren Buffet).


Price of 1 oz. gold on Sep. 10th 2001 (the day before the attack of Osama bin Subcontractor) $271.50 - currently $1,184.00 up 336%.

S&P 500 on Sep. 10th 2001 (the day before the attack of Osama bin Subcontractor) 1,092.54 - currently 1,103 up 1%.

This does not take into account dividends one would have gotten from owning stocks but I doubt it would make much difference.

Prices of cupcakes not available.

FEDbuster's picture

You'll need some Koolaid to wash down those cupcakes.

Superbull take another bong hit, then check out these charts:

Hedge Jobs's picture

he isnt getting senile, he is getting honest. We must be close to the end.

Since the FED is ramping the market to stimulate the economy (it's hard to even write this with a straight face) the share market will be the last thing to fall.

thus the sharemarket has given up its 400 year old role as a leading economic indicator and thanks to the FED has now become a lagging indicator and will be the last thing to fall.

Lagging indicator bitchez! Perfectly normal, everyday stuff in bizzaroworld!

Pope Clement's picture

"he isnt getting senile, he is getting honest. We must be close to the end."

Reminds me of one of the early 20th century's socialist philosophes H.G. Wells who wrote a little treatise on his death bed entitled 'Mind at the End of its Tether' where he had the chilling realization that everything he had ever thought or done was wrong....

Pez's picture

So that means the dali llama himself musta told him, "goonga la goon gala, no goonga lagoon gala"

What_Me_Worry's picture

"At the moment there is no sign of that because the financial system is broke and you can not have inflation if the financial system is not working."

Hmm, isn't the case for inflation, through devaluation, exactly because there is a broke financial system?

Spitzer's picture

Yes, you are correct.

Greenspan is talking about demand pull inflation, not currency inflation.

When the real economy is broke and not capable of servicing the debt through taxation, the debt and the dollar will be sold and the value will plummet. (INFLATION)

Either that or Mongolia and Afghanistan's economies must be booming because they have 20%+ inflation.

jdrose1985's picture

demand pull inflation, not currency inflation.

i would think you must live in afg or mongolia. if you lived in america you could easily see for yourself that prices are much lower now that there is little access to credit which bouys prices. Fuck, look on Craigslist. Matter of fact, look under gold and silver coins. Lot of ads i've been seeing lately have been guys liquidating silver and gold to pay off debts, in fact I had some to liquidate myself here about a a month ago. It used to take less than a day to sell whatever I put up, it took days before I even got a call last time. People don't have cash for these items, they need FRN's to settle debts and the vast majority of people are in debt to their eyeballs. The phenomenon is that people will sell big ticket items off for whatever they can get in the hopes of at least keeping a roof over their head, etc. I have been going to tool auctions and buying things up for pennies on the dollar in many instances, and it's going to get much worse once the government lifelines are throw to the wayside, I would think. People need cash to settle debts, if you have cash then you are in a great position to supply that demand at firesale prices. It was the hyperextension of credit as money which drove prices higher in the last ten years, NOT the printing of mass paper currency of money. This is where you have become blind. The two are seperate and the printing of paper currency at this stage will do nothing as it will be hoarded just like the rest of paper currency currently is. People who think they have dollars in the banks are going to be sorry to realize too late that those dollars are simply loans to the banks, NOT there for safekeeping. The FDIC could never cover more than a minute percentage of bank deposits.



bonddude's picture

Well, Gov Spitzer there thinks Japan has inflation even

though there rates have been at near 0 for over 20

years. It's called collapse.

Spitzer's picture


Japan did a "Bernanke" with its own money that was earned through real production.


Pez's picture

You mean selling gambling chits in High Frequency between Financial Institutions too big to fail isn't production...then I don't know what is!  Sarcasm off

Internet Tough Guy's picture

Bonddude thinks japan had a great depression style deflationary collapse. But he won't address that prices in Japan don't fall.

ToNYC's picture

In Japan, prices don't fall....but sales do, and deflation rages with asset price face-saving by the Japanese TBTFs (or TBTAdmit it)...Financial Hubris to bring on the Tragegy which is Greece.

Eternal Student's picture

Heh. Prices just don't fall, eh? I take it you've never looked at Japanese Real Estate.

bingocat's picture

Prices don't fall in Japan? You say this because of your close observation of Japanese prices over the past 20 years? Or of Japanese government statistics? Stats look at MSRP. People pay less. In 1990, discounts were negligible. In 2010, discounts are huge, and that is AFTER the government has done its best to rejigger the measured component list to keep inflation looking as positive as possible.

Snidley Whipsnae's picture

It is interesting that Marc Faber said in a talk about a month ago (that can be found on King World News) "During my recent trip to Tokyo my cab ride from the airport to downtown hotel cost $250 and my very modest hotel room was $600 per night. Anecdotal info certainly, but interesting nevertheless.

Deflation in real estate and some other asset classes and inflation in the services sector? Since we are all living in an economic experiment who is to say what is possible and when sudden changes might occur.

In Weimar Germany prices remained fairly stable for two years while massive money printing was ongoing...then switched from stability to hyper inflation in one month.

tmosley's picture

There may be some amount of price deflation, but it is only in shit you don't need.  We are less than 5% off the all time highs in gold, which is hardly what I would call deflation.

But think what you want.

Citizen of an IKEA World's picture

 We are less than 5% off the nominal all time highs in gold.

merehuman's picture

Go shop for food. Thats where i see a steady upward pricing. Makes me feel good all over since i am eating my homegrown veggies.