Greenspan Warned Of Housing Bubble... In His PhD Dissertation

Tyler Durden's picture

Submitted by Robert Murphy via the Ludwig von Mises Institute of Canada,

Sometimes you run across bits of trivia that are too funny to be made up. It is common knowledge that Ben Bernanke’s academic work, before becoming Fed chair, involved studies of the banking crises during the Great Depression. This is somewhat ironic, since many of us blame Bernanke’s policies for perpetuating the financial crisis and contributing to the second Great Depression (through which the world is still suffering).

However, what is not as well known - and which only recently came to my attention–is that Alan Greenspan had an ironic element to his own scholarship. Now many readers might assume that I’m referring to Greenspan’s 1966 essay–written when he was an acolyte of Ayn Rand–in which he sang the praises of the gold standard. Obviously, that early work would later prove awkward for Greenspan, as he held the reins of the fiat money engine known as the Federal Reserve.

But that’s not what I’m talking about. Rather, I’m referring to Greenspan’s NYU doctoral dissertation, which he took great pains to bury. Apparently, a reporter for Barron’s was the only person to unearth a copy. Here are excerpts from the April 28, 2008 Barron’s article by Jim McTague, entitled, “Looking at Greenspan’s Long-Lost Thesis”:

The dissertation, written in 1977 when Greenspan received his coveted degree from New York University, had been tucked away on a professor’s sagging bookshelf for 31 years.


…There are only two known copies: the Maestro’s own and the one we viewed. As far as we can tell, Barron’s is the only news organization ever to have seen the thesis since a third and now missing copy was removed from the public shelves of NYU’s Bobst library at Greenspan’s request in 1987, the year that Ronald Reagan appointed him chairman of the Federal Reserve Board. Glancing at the document, we momentarily felt like Indiana Jones at the dramatic moment in which he discovers the Lost Ark of the Covenant.


We were tickled to find that the work’s introduction includes a discussion of soaring housing prices and their effect on consumer spending; it even anticipates a bursting housing bubble. Writes Greenspan: “There is no perpetual motion machine which generates an ever-rising path for the prices of homes.”


Greenspan, however, didn’t foresee a housing mania spilling into the general economy, toppling banks and brokerage houses and paralyzing key portions of the credit system. The worst he could anticipate was that a sharp “break in prices of existing homes would pull down the prices of new homes to the level of construction costs or below, inducing a sharp contraction in building.” Back then, there were no home-equity lines of credit, derivatives or subprime mortgages. Mortgages were largely concentrated at savings and loans. Credit was harder to come by, too, because conventional mortgage rates were about 8.5% and headed significantly higher. Still, the thesis shows that the former Fed boss was focused on housing very early in his career. Thus, it casts doubt on his recent assertions about being surprised by the Mesozoic-era-size impact of this decade’s housing mania.

Thus it seems that Alan Greenspan, when his professional ambition wasn’t involved, could understand perfectly well  (a) the virtues of a commodity money and (b) the dangers of a housing bubble. If the Austrians are right in laying the blame for the housing bubble on Greenspan’s loose monetary policy following the dot-com crash, then Greenspan can’t plead ignorance: He knew what he was doing.

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NotApplicable's picture

Well, there would've been a sharp contraction in building, had there been any element exposed to the risk.

Instead, we got MBSes.

TideFighter's picture

Greenfucker meet NINJA Loans. No credit, no job, no income, no assets....not sure some even fogged a mirror. 


Boris Alatovkrap's picture

You are describe 99% of bankster class, to which are you make of reference?

Leonardo Fibonacci2's picture

Hey Boris....Zdravstvujtye 

I am calling Greenspan and every fucker that lies like him, banksters, Wall Street thugs, Soros, hedge fund execs that fuck around with stock manipulation, the Fed Reserve, precious metals manipulators, currency manipulators, etc.....

TruthInSunshine's picture

Krugman, in 2002, specifically called upon Greenspan to purposefully inflate a massive housing bubble as a "chasing bubbles" form of phantom economic "recovery" in the wake of the meltdown.

When Krugman was reminded of the historical record of his comments/recommendation in this specific & very clear regard, his official response was that he "was just kidding" at the time (I'll pull the transcript when able unless someone beats me to it).

That Paul "When Mars Attacks" Krugman - always the joker; a gentleman & a comedic genius, he is!

bonderøven-farm ass's picture

A spot of Krugman's suggestion covered in Mises Daily....

Boris Alatovkrap's picture

Boris is like break face of Krugman (only for stimulation of local eKonomy).

Boris Alatovkrap's picture

Greenspan is maybe once long time ago Ayn Rand acolyte, but action is betray Greenspan is big bank errand boy. Ever changing philosophy is once in a while correct just like is broken timepiece.

WillyGroper's picture

Looks like his book is soon to be marked down another 75% on top of that 50% if not in the dollar bin entirely.

Lying senile puke.

Boris Alatovkrap's picture

Counting for Fed induce inflation and incorporate retail discount, Greenspan word is not worth paper is print on. In 1987 $USD (time is when appoint by Reagan), inflation adjust, Greenspan book is not worth 2¢.

Offthebeach's picture

George Orwell's obsevation that you get the face you deserve.
Well then theres Greenspan's Mr. Limppet cod lips from a life of sucking off, and deeply, his masters.

Shad_ow's picture

Worse than that.  His policies helped make it happen.

ACP's picture

And The Bernank's PhDipshit was how to 'recover' from when said bubble burst. Almost like it was planned...

Nah, that's just a crazy conspiracy theory!

JackWills's picture

Do these guys just spend all day in the mirror practicing expressions.  That is all they are good for is Vaudeville.

Absolutely useless, they do more harm than good.  Abolish this FED POS and jail some of these bankers.

I mean seriously if you pardon a criminal act and allow it to happen are you not a criminal then yourself.  I mean if one drives a bank robber to the bank do they not get the same amount of time in jail????????????

TheReplacement's picture

Why on earth would you jail them?  They would be useless eaters then.  It would be better to put them to work, make them useful.  Rope stretching is a long lost vocation that needs to be revived.

youngman's picture

He was probably under the infuence of Gefeltafish or something illegal...

Ranger_Will's picture

Back then he wansn't checking the expiration quite the buzz.

Boris Alatovkrap's picture

You are reference of World of War Craft or Jewish delicacy of crush fish part? Boris is suggest sometime is after 1966, dispatch from satanic bankster gild is slip Greenspan roofie and Greenspan is daze and confusing ever after. Greenspan is silly putty in hand of banskter class to do all bidding.

Eurodollar's picture

Big banks big money. Little Greenspan get some money. Big banks even more money.

NihilistZero's picture

In Soviet Amerika banksters drug themselves???

superflex's picture

Fuck you Alan and your foreskin too.


q99x2's picture

Arrest him for treason and throw him into prison before he dies. Don't let him get away.

jcaz's picture

It's important that- before he dies- he understands that everybody knows what he did-  sure, he was just the bagboy,  but he took all the credit during his 15 mins, and now he floats among the high end of the tribe, enjoying what's left of his rock-star status with those too ignorant or needy....

We know, Al-  don't die thinking you can just blame "the formulas"......

Winston Churchill's picture

Jews have no hell in their religion , we should  punish him now before he dies.

WillyGroper's picture

"Arrest him for treason and throw him into prison before he dies."

With a very lonely "Bubba"!

BuddyEffed's picture

Was the housing bubble Alan's self fulfilling prophecy?  Or possibly his epiphany?

Kirk2NCC1701's picture

I once read "Do not attribute to malice that which can adequately be explained by incompetence" (re Gov workers)

I'd modify that to:  "Do not attribute to malice or incompetence that which adequately be explained by greed and corruption".

I suspect that he had an "epiphany".  "For the greater good", you understand. /s

reader2010's picture

Let them eat crack! 

riphowardkatz's picture

Of course he knew what he was doing.

Greenspan also understood that the cause of the central bank in America is the philosophy of its people. Being an economist he wasn't going to change the philosophy.Since the US would have a central banker he might as well be in charge. 

It is a fallacy to think that we live in the system where cental bankers can take drastic or proper measures without taking the fall for the inevitable downsides.Therefore Greenspan attempted to make the falls as soft as possible. 

You can point to the central banker and yearn just like the commies did for a "good one"but that doesn't exist.There is no such thing as proper actions for such a roll. 

rtalcott's picture

Only 3 copies....I had to deliver 5 to the graduate school before I received the sign-off for my degree...

Tenshin Headache's picture

He also knew what he was doing when he blew the dot com bubble.

Uncle Remus's picture

Are you referring to the blowing or the bubble?

TruthInSunshine's picture

His likeness was used to create the sock puppet mascot.

He & Andrea Mitchell have intercourse & perform fellatio upon each other. Let that mind bomb simmer for a while.

frankTHE COIN's picture

Ahh.....There's nothing like a Skeleton that still has a little meat on it.

pragmatic hobo's picture

he will rot in hell ...

kridkrid's picture

Unfortunately, hell is a myth created by sociopaths so that those who can actually experience emotions are disuaded from seeking retribution believing instead that the criminal class will eventually "get theirs".

no more banksters's picture

"Greenspan told Clinton that he should cut government spending, so that interest rates would go down and the markets would boom. He believed that markets would transform America, not politics. It was the beginning of the full deregulated market for the US and the world."

The Heart's picture

Who gives a flying-fish what this cretin says, or does anymore?


css1971's picture

It's pretty bloody obvious that Hanlon's Razor does not apply to those in a position of power.

Kirk2NCC1701's picture

But a barbershop razor still does.

disabledvet's picture

It is ironic since everyone knew by 1966 that inflation was spiraling completely out of control "and we had a whole world of Mr. Fix it's." The obvious was simply looking at Downtown Manhattan itself---hmmmm. "steel re-inforced concrete in an infinite amount...with an infinite amount." ummm, why would i worry lumber? these buildings will last forever. "just turn it into a house and sell it for cash." 1500 bucks would have covered every man, woman and child in the USA back then. And Milton Friedman knew it. "go long copper in Chile?" Really? "that's market pricing in Chicago." you need to look very closely at not just the materials being used...but siting and infrastructure. "concrete reinforced with steel." and that was it. television sets? no problem. radios? no problem. computers? never heard of 'em...

Shizzmoney's picture


Greenspan can’t plead ignorance: He knew what he was doing.

I didn't need this revelation in his dissertation to figure this out. 

If it smells like a rat, and looks like a rat, well's probably not a fuckin' dog.

ejmoosa's picture

The Greenspan of the 70's is not the same Greenspan of the late '90s-early 2000's.

Read his essays in the Capitalism book that Ayn Rand published.  He completely abandoned his core principles...

Papasmurf's picture

He had no principles.  He knew what he was doing and sold his soul to the devil.

kridkrid's picture

It's mildly interesting to consider... did he change his mind, did he sell out, did he, as someone points out below, trade his conjured up "false principles" for $ (slightly different than selling out... which would imply that he had principles at some point), was he a part of MK Ultra, or did he have a double :-)

Whatever it is, he's not the same dude as the guy in the 60's and early 70's.

Rising Sun's picture

Greenspan publishes to whip up the bag holders to buy when insiders are selling.