This page has been archived and commenting is disabled.

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.

 


- advertisements -

Comment viewing options

Select your preferred way to display the comments and click "Save settings" to activate your changes.
Mon, 01/13/2014 - 15:33 | Link to Comment NotApplicable
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.

Mon, 01/13/2014 - 15:38 | Link to Comment TideFighter
TideFighter's picture

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

 

Mon, 01/13/2014 - 15:40 | Link to Comment Leonardo Fibonacci2
Leonardo Fibonacci2's picture

Fucking old fart & liar.

Mon, 01/13/2014 - 15:44 | Link to Comment Boris Alatovkrap
Boris Alatovkrap's picture

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

Mon, 01/13/2014 - 16:03 | Link to Comment Leonardo Fibonacci2
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.....

Mon, 01/13/2014 - 17:01 | Link to Comment TruthInSunshine
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 dot.com 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!

Mon, 01/13/2014 - 18:00 | Link to Comment bonderøven-farm ass
bonderøven-farm ass's picture

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

Mon, 01/13/2014 - 18:44 | Link to Comment Boris Alatovkrap
Boris Alatovkrap's picture

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

Mon, 01/13/2014 - 15:38 | Link to Comment Boris Alatovkrap
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.

Mon, 01/13/2014 - 16:08 | Link to Comment WillyGroper
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.

Mon, 01/13/2014 - 20:59 | Link to Comment Boris Alatovkrap
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¢.

Mon, 01/13/2014 - 16:19 | Link to Comment Offthebeach
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.

Mon, 01/13/2014 - 17:35 | Link to Comment Shad_ow
Shad_ow's picture

Worse than that.  His policies helped make it happen.

Mon, 01/13/2014 - 15:39 | Link to Comment ACP
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!

Mon, 01/13/2014 - 20:11 | Link to Comment JackWills
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.

http://www.americanbanker.com/issues/178_195/fed-frees-israeli-bank-from...

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????????????

Mon, 01/13/2014 - 23:25 | Link to Comment TheReplacement
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.

Mon, 01/13/2014 - 15:34 | Link to Comment youngman
youngman's picture

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

Mon, 01/13/2014 - 15:36 | Link to Comment Ranger_Will
Ranger_Will's picture

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

Mon, 01/13/2014 - 15:44 | Link to Comment Boris Alatovkrap
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.

Mon, 01/13/2014 - 16:47 | Link to Comment Eurodollar
Eurodollar's picture

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

Mon, 01/13/2014 - 16:47 | Link to Comment NihilistZero
NihilistZero's picture

In Soviet Amerika banksters drug themselves???

Mon, 01/13/2014 - 17:00 | Link to Comment superflex
superflex's picture

Fuck you Alan and your foreskin too.

 

Mon, 01/13/2014 - 15:34 | Link to Comment q99x2
q99x2's picture

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

Mon, 01/13/2014 - 15:56 | Link to Comment jcaz
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"......

Mon, 01/13/2014 - 16:20 | Link to Comment Winston Churchill
Winston Churchill's picture

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

Mon, 01/13/2014 - 17:00 | Link to Comment Uncle Remus
Uncle Remus's picture

Well, that's fucking convenient.

Mon, 01/13/2014 - 20:50 | Link to Comment Kirk2NCC1701
Kirk2NCC1701's picture

Well, they got Gehanna.  See https://en.wikipedia.org/wiki/Gehenna

Mon, 01/13/2014 - 16:11 | Link to Comment WillyGroper
WillyGroper's picture

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

With a very lonely "Bubba"!

Mon, 01/13/2014 - 15:40 | Link to Comment BuddyEffed
BuddyEffed's picture

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

Mon, 01/13/2014 - 20:55 | Link to Comment Kirk2NCC1701
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

Mon, 01/13/2014 - 15:36 | Link to Comment reader2010
reader2010's picture

Let them eat crack! 

Mon, 01/13/2014 - 15:42 | Link to Comment riphowardkatz
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. 

Mon, 01/13/2014 - 15:39 | Link to Comment rtalcott
rtalcott's picture

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

Mon, 01/13/2014 - 15:40 | Link to Comment Tenshin Headache
Tenshin Headache's picture

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

Mon, 01/13/2014 - 17:03 | Link to Comment Uncle Remus
Uncle Remus's picture

Are you referring to the blowing or the bubble?

Mon, 01/13/2014 - 17:05 | Link to Comment TruthInSunshine
TruthInSunshine's picture

His likeness was used to create the pets.com sock puppet mascot.

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

Mon, 01/13/2014 - 15:42 | Link to Comment frankTHE COIN
frankTHE COIN's picture

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

Mon, 01/13/2014 - 15:44 | Link to Comment pragmatic hobo
pragmatic hobo's picture

he will rot in hell ...

Mon, 01/13/2014 - 15:57 | Link to Comment Papasmurf
Papasmurf's picture

hopefully

Mon, 01/13/2014 - 15:58 | Link to Comment kridkrid
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".

Mon, 01/13/2014 - 15:45 | Link to Comment no more banksters
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."

http://failedevolution.blogspot.gr/2012/07/the-illusion-of-self-regulati...

Mon, 01/13/2014 - 15:46 | Link to Comment The Heart
The Heart's picture

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

 

Mon, 01/13/2014 - 15:49 | Link to Comment css1971
css1971's picture

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

Mon, 01/13/2014 - 16:31 | Link to Comment Kirk2NCC1701
Kirk2NCC1701's picture

But a barbershop razor still does.

Mon, 01/13/2014 - 15:49 | Link to Comment disabledvet
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 glass...in 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...

Mon, 01/13/2014 - 15:49 | Link to Comment Shizzmoney
Shizzmoney's picture

RE

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 then...........it's probably not a fuckin' dog.

Mon, 01/13/2014 - 15:52 | Link to Comment ejmoosa
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...

Mon, 01/13/2014 - 15:58 | Link to Comment Papasmurf
Papasmurf's picture

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

Mon, 01/13/2014 - 16:16 | Link to Comment kridkrid
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.

Mon, 01/13/2014 - 15:54 | Link to Comment Rising Sun
Rising Sun's picture

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

 

 

Mon, 01/13/2014 - 15:59 | Link to Comment fijisailor
fijisailor's picture

Greenspan had principles like Obummer.  It's good to start out with principles so you can trade them for currency.  /sarc

Mon, 01/13/2014 - 16:01 | Link to Comment yogibear
yogibear's picture

Greenspan, Bernanke, Evans and Dudley all need locked up for years with hardened criminals and made sure their celled with their personal Bubbas. 

These PhDs know what the result of their actions will be,

Mon, 01/13/2014 - 16:02 | Link to Comment dbTX
dbTX's picture

I also knew what he was doing.

Mon, 01/13/2014 - 16:06 | Link to Comment astoriajoe
astoriajoe's picture

Paging Mr. Weir, Mr. Bix Weir.

Mon, 01/13/2014 - 16:09 | Link to Comment akak
akak's picture

I think Mr. Weir is on the road to Roota, which of course ends up in Crazytown.

Mon, 01/13/2014 - 16:21 | Link to Comment astoriajoe
astoriajoe's picture

Yeah, but the architecture in crazytown sometimes looks similar to where we're standing now.

Mon, 01/13/2014 - 16:06 | Link to Comment fijisailor
fijisailor's picture

What, no more discounts on Dreamspam's book?

Mon, 01/13/2014 - 16:11 | Link to Comment Hubbs
Hubbs's picture

See what senility does to you? He had it right when he was young, then lost it. Should be age  limits on polticians as well. They do it for airline pilots and surgeons.

Mon, 01/13/2014 - 16:16 | Link to Comment Seasmoke
Seasmoke's picture

Israel also knew.

Mon, 01/13/2014 - 16:20 | Link to Comment rlouis
rlouis's picture

I can just see his new book's updated price sticker, reflecting market clearing forces: 75% off

Mon, 01/13/2014 - 16:26 | Link to Comment HamRove
HamRove's picture

Has anyone here heard of the "Road to Roota" theory?

That is that Greenspan has been working behind the scenes as sort of a spy to set up the banksters for their eventual bubbles that would destroy the fiat paper market. Apparently he has been at it for some time, and his goal was to allow the fiat bubble noose to hang every banker by virtue of their own folly...

could happen..maybe.

Mon, 01/13/2014 - 16:34 | Link to Comment gookempucky
gookempucky's picture

Greenspan photo looks a lot like a sunbleached cow patty minus the mushrooms.

Mon, 01/13/2014 - 16:35 | Link to Comment moneybots
moneybots's picture

"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."

 

Of coarse Greenspan knew what he was doing.  He told home buyers to get adjustable rate mortages.  A housing bubble was Greenspan's intent.  All during the previous non housing bubble era, Greenspan never told home buyers to get adjustable rate mortgages. 

It is not just loose monetary policy, it was ZERO banking standards policy, which Greenspan had authority over, which lead to the bubble.  Add to that, the Ownership Society.

Mon, 01/13/2014 - 16:54 | Link to Comment I Write Code
I Write Code's picture

What y'all have already said, by the time he became chairman he was addled.

But I'll give him half a break, things changed in the world and are still changing, and Greenspan the old fart couldn't keep up - or else he might have pulled Bernanke stunts in 1991.

Ask me again in twenty years, maybe we'll have some perspective by then.

If we're not all living in caves. 

Mon, 01/13/2014 - 17:16 | Link to Comment The Carbonator
The Carbonator's picture

Can somebody get a hold of one of Obamas papers from college or are they stored in Area 51 with the Alien bodies and Arc of the Covenant.

Mon, 01/13/2014 - 17:31 | Link to Comment Nutflush60
Nutflush60's picture

When Greenspan wrote the paper, he did not envision 5% down loans.

Mon, 01/13/2014 - 17:32 | Link to Comment Yancey Ward
Yancey Ward's picture

In Greenspan's defense, that dissertation was written by a know-nothing hack.

Mon, 01/13/2014 - 20:54 | Link to Comment LooseLee
LooseLee's picture

Not unlike the MORON's BTFD and BTATH.....Is that you?

Mon, 01/13/2014 - 17:56 | Link to Comment Spungo
Spungo's picture

You spend the first 25 years of your life trying to show the world how smart you are. You spend the remaining years trying to hide how much you know.

Mon, 01/13/2014 - 19:28 | Link to Comment I Write Code
I Write Code's picture

And trying not to know it.

Mon, 01/13/2014 - 18:21 | Link to Comment kita27
kita27's picture

Yeah but how can you punish a guy that looks dead already?!

Mon, 01/13/2014 - 18:28 | Link to Comment akak
akak's picture

Try me.

Mon, 01/13/2014 - 18:44 | Link to Comment NoWayJose
NoWayJose's picture

The Greenspan and Bernanke legacies are already written, and will be studied for centuries as the cause of the great global economic collapse of 2014.  Historians will not be so kind....

Mon, 01/13/2014 - 20:48 | Link to Comment LooseLee
LooseLee's picture

Greenspan is akin to the disciple who BETRAYED Jesus. He will ROT in HADES...No amountt of 'explanation' will reverse this....

Mon, 01/13/2014 - 21:58 | Link to Comment Esculent 69
Esculent 69's picture

Hey AKAK. If you have read the roota theory how would you explain the comic book from the boston fed "wishes and rainbows" as part of educating kids on money?  genuinely curious.  Its an interesting theory that definitely makes one question things.  It would be nice to know that there are white hats in our government that wish to protect and save this country. 

http://www.roadtoroota.com/public/120.cfm

http://www.bostonfed.org/education/pubs/wishes.pdf

This is the piece on Greenspan and his possible secret. Its hard to tell anymore who has sold their soul and who is having to act just to hopefully steer this thing back our way of sound money.  

http://www.roadtoroota.com/public/101.cfm

Me thinks that we've been in economic warfare since we helped take down the soviets in a very similar fashion.  using the market to manipulate and attack your enemies financial stability.

but then again this has been happening for far longer than the usa has been around.  the american revolution may have very well started because of it,  and not necessarily taxes. 

http://www.no-debts.com/anti-federalist/files/ownmoney.txt

would like to hear/read comments.

edit: i changed russians to the proper soviets.  however they are still russian so technically i had it right, but wanted to be accurate.

Mon, 01/13/2014 - 23:04 | Link to Comment akak
akak's picture

Esculent, while I am strongly inclined to dismiss Bix Weir's "Road to Roota" theory as just nonsense, you DO have a point --- just what WAS the purpose of that comic book --- and printed by the FED, no less!?   I can't really say.  Have other Fed branches ever printed any comic books, or any similar material?  It is a riddle.

Mon, 01/13/2014 - 21:12 | Link to Comment Esculent 69
Esculent 69's picture

For those of you who haven't read the 1966 the objectivist : alan greenspan- gold and economic freedom here you go.  hard to believe anyone this aware of the role of gold and freedom would somehow just do a 180.  If its greed and power then he needs a "necklace" mandela style. 

http://www.321gold.com/fed/greenspan/1966.html

Tue, 01/14/2014 - 00:24 | Link to Comment Esculent 69
Esculent 69's picture

with so much disinformation out there and the history of the world to study, it really can be overwhelming. i do know this.  the world since we've known is about those that wish to control/rule over others.  

this country has been the only nation in history that was founded to correct that record by trying to institute a free society for the people, not a government.  it is hypocrtical to note that some founders owned slaves which flies is the face of that founding.  at least they tried to make it happen.  

i cant believe that the good people in our government who do believe in the idea of the constitution, limiting government, would just not fight.  might have to do it under the cover of darkness.  

btw- his theory on the new $100 bill is equally fascinating

http://www.roadtoroota.com/public/261.cfm

Lets prey that we win this battle because im not too keen on the taste of victory gin. 

Tue, 01/14/2014 - 11:39 | Link to Comment Loophole
Loophole's picture

I'm a long time Ayn Rand fan and was reading Greenspan as far back as 1964. He wrote that early stuff when he was still under Rand's influence.

Greenspan is today and for decades has been regarded as a traitor by Objectivists.

Do NOT follow this link or you will be banned from the site!