Guest Post: Alan Greenspan Asked For Advice, Do People Ever Learn?

Tyler Durden's picture

Submitted by James Miller of the Ludwig von Mises Institute of Canada

Alan Greenspan Asked For Advice, Do People Ever Learn?


That is the only way to express this author’s utter bewilderment that former Federal Reserve chairman Alan Greenspan is still given an outlet to speak his mind.  Actually, I am surprised Mr. Greenspan has the audacity to show his face, let alone speak, in public after the economic destruction he is responsible for.

It was because of Greenspan, of course, that the world economy is still muddling its way along with painfully high unemployment.  His decision to prop up the stock market with money printing under any and every threat of a downtick in growth, also known as the Greenspan Put, created an environment of easy credit, reckless spending, and along with the federal government’s initiatives to encourage home ownership, the foundation from which a housing bubble could emerge.

It was moral hazard bolstering on a massive scale.  Wall Street quickly learned (and the lesson sadly continues today) that the Federal Reserve stands ready to inflate should the Dow begin to plummet by any significant amount.  Following his departure from the chairmanship and bursting of the housing bubble, Greenspan quickly took to the press and denied any responsibility for financial crisis which was a result in due part to the crash in home prices.  In his infamous 2009 Wall Street Journal editorial, he had the nerve to blame availability of credit which financed the run-up in home prices to a “savings glut” in Asia.  He writes:

[T]he presumptive cause of the world-wide decline in long-term rates was the tectonic shift in the early 1990s by much of the developing world from heavy emphasis on central planning to increasingly dynamic, export-led market competition. The result was a surge in growth in China and a large number of other emerging market economies that led to an excess of global intended savings relative to intended capital investment. That ex ante excess of savings propelled global long-term interest rates progressively lower between early 2000 and 2005.

Sounds convincing right?

Much of the aura of greatness attributed to Greenspan throughout his term as chairman was due in part to the purposefully overly-technical language he used when talking to reporters.  Here he utilized the same technique, albeit in a simpler manner, to obscure the Fed’s role in the housing bubble.  His explanation falls on its face though when looking at key historical data and by asking the right questions.  As University of Georgia economics professor George Selgin documents, Greenspan’s lowering of the fed funds rate, that is the rate banks pay each other to borrow money on the overnight market, coincides with the lowering of mortgage interest rates when taking account for the variable lagging effects of monetary policy:

To put downward pressure on long term mortgage rates, an increased pool of dollars had to be available.  If Asian economies experiencing an unprecedented increase in savings were to invest in the United States and provide the financing for reduced mortgage rates, there would have to be an increasing supply of dollars available for Asian savings to funnel into the U.S.  And as economist George Reisman brilliantly shows, the “savings glut” argument doesn’t stand when taking into account the following questions and observations:

First, if saving had been responsible, rather than credit expansion and the increase in the quantity of money, there would have been a corresponding decline in consumer spending in the countries allegedly doing the saving. The fact is that there was no such decline.

Second, saving implies a growing supply of capital goods, more production, and lower prices, including lower prices of capital goods and even of land. These are results that are incompatible with the widespread increases in prices typically found in a bubble.

Third, if somehow saving had been responsible for the housing bubble, the spending it financed would not suddenly have stopped. Such stoppage is a consequence of the end of credit expansion and the revelation of a lack of capital.

Fourth, if large-scale saving rather than credit expansion had been present, banks and other firms would have possessed more capital, not less. They would not be in their present predicament of having inadequate capital to carry on their normal operations. This situation of insufficient capital is the result of malinvestment and overconsumption, which are the consequences of credit expansion, not saving.

Fifth, in the absence of increases in the quantity of money and overall volume of spending in the economic system, saving also implies an immediate tendency toward a fall in the economy wide average rate of profit. This is another result that is incompatible with what is observed in a bubble or boom of any kind, which is surging profits so long as “the good times” last.

It should be perfectly clear at this point that Greenspan holds the majority of the blame for the housing bubble.  And yet many financial media outlets still see the former central banker as a type of guru on global economic affairs.  Sure enough, Greenspan headed the institution predominately culpable for the state of the global economy.  The Federal Reserve’s monopoly over the supply of the dollar, still the world’s reserve currency, means its policies often have repercussions on a grand scale.

Recently in the Financial Post, Greenspan was interviewed and offers some thoughts on the Eurozone crisis and what path should be followed to rectify the ongoing sideshow.

Q. So what is the possible outcome?
A. At the moment, northern Europe finances southern Europe. There is tax evasion and illegal commerce in Greece, Italy, Portugal, Spain. The European Central Bank is printing money to finance all the shortfalls in fiscal deficits of southern Europe. This has to stop at some point and when it stops, you are going to have a major confrontation of the euro and all countries will have to make a fundamental choice. The only resolution is political union of the eurozone countries.

For a supposed free marketer, it’s awfully strange that Greenspan would regard tax evasion as a bad thing.  Money not forcefully plucked by the highway robbers occupying the public offices of the PIGS is better used in the private sector where consumer needs are satisfied; not political ones.  It stands to be reckoned that tax evasion is actually playing a significant part in keeping the economies of these heavily indebted countries afloat.  As I have noted before:

Tax evasion is typically listed as a “problem” for Greece- economist Martin Sullivan calls it “disrespectful”- but evasion is only a problem if one considers the person who flees from a mugger a problem for the mugger himself.

Greenspan really lets his statist side show by calling for political unionization as the only feasible solution.  Though it is true that monetary unions have never survived unless united politically, Greenspan treats a break up as out of the question when the EU is indeed breaking up before the world’s collective eyes.  The debts are too high and no politician in either country seems willing to take the necessary steps to rollback the welfare state and spending.  Crying foul over brutal austerity measures has become all the rage despite the fact that no real austerity is taking place.  The economic truth that you can’t spend what you don’t have is being ignored by the ruling class as the citizens of the PIGS keep buying into the fantasy that their elected and appointed leaders are truly looking out for them.

Greenspan’s advocacy of a European political union is demonstrative of his bent toward overall centralization of power.  No man principled enough to believe in liberty and free markets would ever utter such nonsense.

Greenspan is then asked point blank over his alleged belief in the ability for the market to correct itself in lieu of government regulation.

Q. You mentioned in 2008 at a Congressional hearing that you had placed too much faith into self-correction on the part of markets, so do you think the new regulations will protect the public?
A. It’s doubtful. I was on the J.P. Morgan board where we were acutely aware of maintaining our credit rating and how important that was. I thought all banks thought that way and they would be the best protectors, but I was mistaken. A number of banks allowed significant contraction of capital and indeed, towards the end Bear Stearns had 3% capital, unheard of in a banking system. I’ve had to change my view and you cannot count on bankers to protect their own equity. This is why I’m strongly supportive of higher regulated capital requirements now.

Again, Greenspan ignores how his actions affected the decisions of major banks to overleverage themselves.  From the tech boom and bust to the housing bubble, Greenspan gave a clear signal to the banking system that he would be there to save the day with the printing press should it find itself much too leveraged to sustain a turn for the worse.  This precedent dates back to bailout of Long Term Capital Management as popular financial blogger Barry Ritholtz explains in his great book Bailout Nation:

Of course, that’s not how Greenspan saw it. The failure of LTCM would have had a very negative impact on psychology. Woe to the Fed Chair who allows traders to become morose! That was how Mr. Atlas Shrugged rationalized the intervention. (Thank goodness Ayn Rand was already dead).

Whether that would have turned out to be true is a matter of much dispute. The evidence leads me to surmise that not only would LTCM’s demise not have caused the system to collapse, it would have done a world of good.

Had LTCM been allowed to fail naturally, perhaps a lesson might have been learned: risk and reward are each sides of the same coin. Alas, it was a missed opportunity for the traders and risk managers at major banks and brokers to learn this simple truism. The parallels between what doomed LTCM in 1998 and forced Wall Street to run to Washington for a handout in 2008 are all there, and the significance of these missed opportunities are now readily apparent.

Ritholtz unfortunately makes the same mistake the interviewer at the Financial Post did in attributing Greenspan’s belief in the unfettered market to influencing his decision to bailout private companies that made bad bets.  True capitalism is about profits and losses; no matter the contagion effects.  Engaging in bailout after bailout demonstrated the exact opposite of what is often ascribed to Greenspan; that he was not a defender of free markets but someone who headed the greatest state-authorized regulatory body in the world.

Much like he does on all of these matters, Murray Rothbard had Greenspan’s number even before the tech bubble.  Writing in the Free Market in 1987, Rothbard hits the nail on the head:

Greenspan’s real qualification is that he can be trusted never to rock the establishment’s boat. He has long positioned himself in the very middle of the economic spectrum. He is, like most other long-time Republican economists, a conservative Keynesian, which in these days is almost indistinguishable from the liberal Keynesians in the Democratic camp.

As an alleged “laissez-faire pragmatist,” at no time in his prominent twenty-year career in politics has he ever advocated anything that even remotely smacks of laissez-faire, or even any approach toward it. For Greenspan, laissez-faire is not a lodestar, a standard, and a guide by which to set one’s course; instead, it is simply a curiosity kept in the closet, totally divorced from his concrete policy conclusions.

Thus, Greenspan is only in favor of the gold standard if all conditions are right: if the budget is balanced, trade is free, inflation is licked, everyone has the right philosophy, etc. In the same way, he might say he only favors free trade if all conditions are right: if the budget is balanced, unions are weak, we have a gold standard, the right philosophy, etc. In short, never are one’s “high philosophical principles” applied to one’s actions. It becomes almost piquant for the Establishment to have this man in its camp.

Greenspan’s advocacy of laissez-faire is nothing but a mythical trait evoked to tarnish those who believe in actual free markets.  Because of Greenspan’s inept leadership, Keynesians, politicians, and the like can paint the uninhibited market as unstable and subject to huge failures when actual capitalism hasn’t been attempted in the U.S. in over a century.  And even then the free market wasn’t allowed to prevail due to regulation at the state level and legal tender laws.

Greenspan was never a believer in the freedom of the market.  His adoration of capitalism was a disguise for his real motive to be chief regulator.  That’s why, when asked what keeps him up at night, he answersWhat could go very wrong if the euro busts up.”

The answer is nothing could go wrong when considering the long term.  The breakup of the euro would go a long way in fixing the damage done by fiat currency and the central banks which provide it. 

In a just world, what would ensure Greenspan’s sleeplessness at night should be the prospect of hordes of pitchfork-armed, disgruntled unemployed waiting to take out their frustration on his disastrous tenure as head of the Fed.  Instead, he frets over the breakup of the Eurozone which is coming regardless of decisions the buffoon technocrats come up with to keep the party going just long enough to cash out on their respective government’s dime.

The fact that he is the keynote speaker at the upcoming International Economic Forum of the Americas/Conference of Montreal shows just how clueless the participants at such a forum are.  Taking his advice will only lead the world into further monetary chaos.  Rather than a valiant defender of the market, Greenspan championed money printing, otherwise known as counterfeiting in any other industry, as the perfect vaccine for economic ills.  His greatest accomplishment was selling the world Keynesian snake oil wrapped in an articulate package.  He got out of the house of cards before it tumbled beneath the feat of his successor who is following the Greenspan rulebook to a tee.

Publications that seek Greenspan’s advice show their true ignorance of the financial crisis and its foremost cause.  Given his track record, it’s a safe bet that anything the former Fed chairman recommends will benefit the establishment and banking sector over the general public.

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Every President through modern history has spent money like their hair was on fire. No exceptions. And, Congress approved an endless litany of unbalanced deficit spending budgets year after year. They didn't mind creating slavery for the tax payer, and printing free money compliments of the Fed for their banker / Wall Street buddies to bail them out of the mess created by the miracles of deregulation. lobbying, and corruption.

All accomplished regardless of which party or President was in charge. They are all cut from the same block of cheese, and they are all culpable.  I just hope we survive the end result of having criminals running the country for decades. Put your money in something tangible, because the dollar is going to continue to tank, resulting in way more inflation. And, banks may not survive the firestorm of margin lending, credit default swaps, and derivatives created that exceed 250 quadrillion dollars in total  - more money than the gross domestic product of the entire planet for decades.  

The Federal Reserve is neither Federal nor a "Reserve". This private bank run by the "Bank of England" has been stripping the US of its assets since the days of Andrew Jackson.  If the $16,000,000,000,000.00 given away secretly, since 2007, to the member banks isn't reason enough to overhaul our entire government financial system then our country is doomed to financial failure.

You won't read this in the mainstream media....but it may emerge in the coming elections. Read about the first ever audit of the Fed and understand why we are in such trouble. 

Yep, repeat post, relavant, and disheartening to understand as fact. It reads like fiction, but the book cannot be put down, and it ends badly, real soon. Be a fucking boy scout - be prepared, as best you possibly can. There is going to be a paper bonfire that makes Rome burning look like a birthday cake candle. Bullish on essential commodities only - fuck paper and fiat.


markmotive's picture

Here's the question everyone should be asking:

Do you blame the dealer?

Or do you blame the addict?

Greenspan only provided what virtually EVERYONE wanted.

The Big Ching-aso's picture



He's like a punch drunk ex-boxer hoping for another big fight.  Someone should advise him his career is over.

Popo's picture

Greenspan openly admitted total failure in congressional testimony when Harvey Waxman asked him about "his philosophy".

Greenspan admitted that he had "found a flaw" (the understatement of the century) in his philosophy of non-regulation: He admitted that banks would *not* effectively self-regulate and would often pursue short-term profits at the expense of their own long-term survival, and at the expense of the stability of the system.

It's one of the most unbelievable moments in monetary policy ever. Because the champion of deregulation acts as if the most obvious and frequent criticism of his policy, is some difficult-to-perceive "flaw" that few could have imagined. His now-famous "I found a flaw" testimony (Google it!) is the single moment when his entire Randian philosophy of deregulation publicly implodes, as he stutters an open admission of grand philosophical failure.

Waxman pointedly asks: "Were you wrong"?

And Greenspan basically says: Yes.

If Waxman had had more time, I believe his next statement would have been: "Are you fucking shitting me bro?!!"

LetThemEatRand's picture

And yet, half of ZH still believes what he believed before he admitted he was...  OBJECTIVELY WRONG.'s picture

Greenspan said he's a free marketeer. Bush said he bombed people for freedom. They have always truly stated the motives for their actions. Therefore not only free markets but freedom itself have been proven to be bad.

That's LTER's version of objectivity.

LetThemEatRand's picture

How many factories did your friend Rand build?'s picture

Ayn Rand, whom I never met and whom I can not therefore call a friend, built no factories as far as I know. Do you have a point?

Popo's picture

While in the subject of Rand: this might be one of the funniest things I've ever read:'s picture

That is hilarious. It is so true that living life by one's own principles is a joke! Thanks for sharing.'s picture

Rand's philosophy was based on the idea that one should live one's life by one's own principles. Your link suggests that her work was a joke. I have taken issue with that point of view by expressing satirical derision.

Popo's picture

I think that's a radical oversimplification of Randian philosophy.'s picture

Yes, of course. But it is a fair assessment no matter how succinct.


"I swear by my life, and my love of it, that I will never live for the sake of another man, nor ask another man to live for mine."  --John Galt's pledge from Atlas Shrugged

Popo's picture

Right. Randian objectivism on a personal level has merit.

The issue here is Randian objectivism as it applies to financial oversight and market regulation. (Areas in which Rand herself was very vocal) Greenspan, a major advocate of Rand, used Randian objectivism to justify deregulated markets on the grounds that stability was the result of self-interest among market participants.

Needless to say, Randianism and market self-regulation didn't work out so well.

Greenspan deeply misunderstood that short term profits can outweigh long term stability.'s picture

Greenspan sold out. He talked about the importance of gold as sound money during the sixties. But as Chairman of the Fed he oversaw an organization which operates in direct opposition to free markets. The fact that Greenspan lied about favoring free markets in order to prop up an oligarchic standard of central control does not make free markets themselves a bad thing. Savvy?

Please explain how Greenspan could possibly be a proponent of free markets and Chairman of the Fed at the same time.

LetThemEatRand's picture

What did Rand do in practice?

In practice her protoge was a douche.  Like you.

Oh regional Indian's picture

Now now ladies...she is dead and her thrust is pretty clear, innit?

Enlightened Selfishness. Nothing wrong with that. You cannot help any-one unless you can help your-self.

So, start by living true to your own inner compass (which imples that you know where said compass is).

Everyone who get's their knicker's in a twist over someone else's philosophy is doubly ironical in the case of Rand, yes? Think up your own Philo, phil. Stop trying to dissect hers., Greenspan is obviously a man without a Span (backbone) and spent his life Miss-understanding Rand.

Someone say somethign new. Rand has been dissectted to death.




Likstane's picture

Never, ever, take the advice of a woman. 

JOYFUL's picture

ORI ...

having recently thrown kudos yur way[friday last I believe], I suffer no remorse in correcting yur limp-wristed toss at the dartboard here today!

the self [englightened or otherwise] be-ing but a fictitious construction of the wandering mind, has no merit other than as willing actor pon a stage of self-constructed thought that en-nobles itself only through working on behalf of other[s]...

this itself be the vast and mighty inherited wisdom of a bunch of horseridin, sword-forgin warrior types what spanned the 'known' world of yur homeland n mine, millenia ago: long before the algorythmic allegories of the really real that be passed off now as 'reality' were allowed to intrude upon the wisdom of our forebears...

the Greenbot never misunderstood a thing aboot Rand and her misanthropic "thrust"...he, like all the other mind-controlled minions of the great demonic power spoke with unerring serpent tongue logic to those of our aryan peoples who Mengele and the other doctors of evil took the measure of and imposed a dna-mapped programme of inveiglement onto....on behalf of his sio-nazi puppetmasters, who like the Rand itself, neither male nor female, suffer the eternal hell of being neither dead nor live...the tru hungry ghosts of the moneypower golem.

I believe it appropriate to encourage you to make yur Kashtriya style Kailash Mansarovar Tirath Yatra now, in order to get back in touch with  understanding what made our peoples great before the cabbalist crusade to take us all down to hades\lowerlifeforms, and how to work best on their collective behalf to defend against that great evil. May yu meet the Great Brahman Saraha along yur way!

Oh regional Indian's picture

Joyful, as always, your incisive insight is appreciated, I'll take the bouquet's with the brickbats.

Yet, I'll hold my place and taking the tirtha as well advised, but I'll say this, I've found that the entire Yatra is right to where said inner compasse's central node resides.

There is no their or our, really. The division is a fig-meant to dis-tract. 

All we have is this one self and a jungle of constructs. Our great ancestry is as fucked up as their ancestry. All the warring stories, Ramayana, Mahabharata, all the same shit. Lionization of WAR.

Jihad is inside. That is my journey, which is to find the self, objectively.

I like Rand because she reflects Gurdjieff a bit.

I hear you though.


StychoKiller's picture

Betcha he could spell "Protegé" properly, though! :>D

lasvegaspersona's picture

when you see you are getting into one word lines

Let us agree to start another comment




Pinto Currency's picture



Greenspan's greatest assets are that he is a maleable, toady, and most useful punk.

He knows it and JPM knows it.

Harlequin001's picture

or you could buy a bigger screen...

JOYFUL's picture

but like the Man says....

doncha get toooooooooooo tight! [Archie Bell n the Drells\TightenUP!]

Hulk's picture

The arguments are getting fairly thin...

New World Chaos's picture

Iron principles?  Ayn Rand got social security plus a taxpayer bailout to treat the lung cancer she got from chain smoking.

Galt's Gulch is a fantasy.  The whole place was owned by a banker, for starters.  Why did she say nothing about the Fed and so little about the insidious evils of the banking system in general?  Surely she knew.  Perhaps she approved.  Social Darwinism and all that.'s picture

So it's Ayn Rand's fault that you weren't paying attention? In the future you may wish to do a little research before criticizing a person for not doing what they have already done in spades.


     "Whenever destroyers appear among men, they start by destroying money, for money is men's protection and the base of a moral existence. Destroyers seize gold and leave to its owners a counterfeit pile of paper. This kills all objective standards and delivers men into the arbitrary power of an arbitrary setter of values. Gold was an objective value, an equivalent of wealth produced. Paper is a mortgage on wealth that does not exist, backed by a gun aimed at those who are expected to produce it. Paper is a check drawn by legal looters upon an account which is not theirs: upon the virtue of the victims. Watch for the day when it bounces, marked, 'Account overdrawn.' -- Ayn Rand's Atlas Shrugged



New World Chaos's picture

Yeah, I did remember this classic. Maybe I wasn't paying attention, but IIRC, it was about GOVERNMENT currency debasement and it was also the only time she gave a reason for owning gold. Nothing about the huge stocks/flows ratio, which effectively means that even the miners cannot inflate gold, and therefore it is money. This is crucial. Nothing about it lacking counterparties and being invisible to the looters either.

She said nothing about how the banking system does not lend anything at all when they make a loan, but they get people doing real work on their hamster wheel to pay the interest. Nothing about how the banks and the Fed use low-interest loans to cronies for social engineering and power centralization. Nothing about how the Fed is a creature of the Rothschilds, not the government. Nothing about how they are a shadow government. Nothing about how they start wars and finance both sides.  Nothing about how bankruptcy isn't a bug in the system, it's a feature. Banksters intentionally create panics to consolidate power and breathe in real assets at pennies on the bailout dollar. Nothing about how this all serves the purposes of the New World Order.

I loved Atlas Shrugged in 2004 but now I see that, at the very least, Ayn Rand drank too much of her own kool-aid and blinded herself to the true nature of the Beast which lurks at the heart of the financial system.  Galt's Gulch is a fantasy because her incorruptible supermen don't exist and could never resist the tentacles. This is why the whole system needs to burn.  NO centralized power.

+1 for producing one of the best quotes in the book.

BeetleBailey's picture

Excellent.....and probably the truth.

BenLightYear's picture

The problem of course is the minuscule time frame waxmen, Greenspan, and of course yourself are using. Not too mention the fact the banks are overseen by the exact same folks who have the ability to bail them out. Let me explain further. If the fed res willingly bails out gambling banks and leaves them unregulated to continue gambling the same thing will happen again. However if they chose to not bail them out, let them fail, then held those responsible appropriately then over time banks would stop. Not too mention those who make deposits would be a bit more careful in regards to the institutions they deposit with. When you remove risk from the equation what ya end up with is a free for all with little regard to the long term.

The thing I miss most is the level of intelligence that used to be found in these comment sections. The articles are still decent as long as you are willing to read between the lines of bias you are forced to confront regardless of where you get information. The comments however border on complete uselessness. I find it hard to believe more than 5 people who comment have ever learned basic economics let alone attempted to validate theories they so adamantly accuse.

So let me give a tad bit of insight into what we have been witnessing for 99 years and which has increased greatly since Reagan. It is experimentation. Economics is not a science. There are no set constants. Which means to validate or invalidate theories they must be tested and tested in such a scenario to deem credible. Basically put in real world in real time. That is what we witness on a daily basis. An experimentation to allow high levels of progress by removing the constraints forced upon a money supply and credit supply due to a finite amount of capital. It is nothing more and nothing less. We are the rabbits and the monkeys in said experiment. Furthermore I don't understand the anger provoked by doing so. Yes some win and some lose. That's life. No matter where or when you have lived throughout history it has always been the case. I guess the issue I find so disturbing is that for the first time in history anyone with reasonable intelligence can take full advantage from the sidelines of such experimentation. If the last 10 years have been bad for you financially then I'm sorry my friend you are an ignorant moron who at any other point in history would have only been spared an early death if you were fortunate enough to be of noble birth. If you bought a house in 2006 and are %30 underwater it's because you are ignorant. If you put all your money into tech stocks in 1999 then you are ignorant. If you are still holding your gold and silver without taking profits for the last 10 years you are ignorant.

The free market is the answer for one reason and one reason only. It is fair. Those who learn and use that knowledge combined with common sense to anticipate what is right in front of your eyes then you will do well. If you don't then you won't. The truly sad part is the ignorance of the average person today which is caused by nothing more than the willingness to remain ignorant. Greenspans experiments went badly I will grant that. I will however argue anyone who believes it would have become a long term trend.

I look forward too the many ignorant comments I recieve and hopefully there is at least one person still commenting on this site that can offer a reasonable rebuttal. My hope in the latter is the only reason I have chosen to keep my comment so short.

I understand I have used unkind words. I implore you to make me look like a fool.

Jendrzejczyk's picture

I'm an ignorant moron and even I know the usage of to and too (they equal for, right).


piliage's picture

I agree, certainly that the anti-semetic jew hatred on ZH is quite vile.

"Greenspan's experiments went badly I will grant that. I will however argue anyone who believes it would have become a long term trend."

I was at a conference in 2004 with the head of economics of a major organization, I'll leave exactly where and who anonymous. He presented a TON of data and charts showing the Fed was off the rails on loose credit, and the housing bubble was going to be a global disaster. It was the first time I'd seen a contrarian argument to the Fed's actions. It was an extremely compelling presentation.

Until that time, Friedman, Miller and Modigliani, and the Chicago school held sway. Debt was no problem to worry about, the models were working fine. Nothing to see here.

There is no grand Protocols of the Elders of Zion conspiracy here. What happened was ego and hubris, pure and simple. Everyone believed the models - the Chicago School was king, and we had solved all banking problems. Modern monetary theory = America = global capitalism. We're right, you're wrong!

Politicians left and right loved the housing bubble. It created jobs, lots of jobs. It was good for all sectors, increased productivity, and helped local government increase the property tax base. EVERYONE bought into the bullshit, me included.

What this shows, more than any one thing, is that you can't control risk and live in statistical alpha in a portfolio. Risk is not evenly distributed as the models have you believe, it has tails, VERY VERY long tails, and those tails will destroy you.

Also, the single worst decision made in the last 20 years was the Financial Services Modernization Act of 1999. If we didn't learn from the Garn-St. Germain Depository Institutions Act (S&L scandal), we must learn now. Banks MUST be regulated and watched as they can't be trusted with our money.

economics9698's picture

Learn your financial history, Yids have been playing this game for centuries.  There is a reason people kill them all the time.  Any mother fuckers take food out of my families mouth will have a fucking problem to deal with.  The game is about to be played and the central bankers better get the fuck out of America while they can.

Popo's picture

What "game is about to be played" exactly?

Could you be more specific?

economics9698's picture

The game where we MF's drop the mask and get medieval on all the nasty mother fuckers on this planet.  Payback time is coming.

JOYFUL's picture

...There is no grand Protocols of the Elders of Zion conspiracy here. What happened was ego and hubris, pure and simple. Everyone believed the models - the Chicago School was king...

the 'chicago school' was cabbalism in action chum...the planned takedown of the great Merikan experiment in personal liberty and untrammeled horizons...all brought to nought by the Alan Greenspans\Ginsburgs\ of the Khazarian Kultural Kommisariat of revenge against the great nomadic peoples of our past...

And future. If we be bold enough to learn our history, n throw off our chains...and the mongrel moneychangers like yu* in our midst.

*Yu purposely mis-represent the opposition to sionist hegemony here as "anti-semiticism" and "jew hatred"...and thereby expose yurself as a bankrupt tool of the moneypower...there will be no pity nor forgiveness for yur efforts to mislead n misdirect our attention, golem.

piliage's picture

"the 'chicago school' was cabbalism in action chum, the planned takedown of the great Merikan experiment in personal liberty and untrammeled horizons"

So, you're saying Milton Friedman was a totalitarian fascist? Jeeze, the mind boggles.

JOYFUL's picture

while we can both agree to yur bein fairly 'boogled,' the Milton Friedman school of e-con-nomics was nothing more than a thin patina of gloss upon the greater canvas of frankist\sabbatean subterfuge, which ranks as no more than a mere milestone on the highway to hades which we have been saddled with since calvinist crypto-sionist Friederich Engels used the proceeds of his textile mill "kapitalist' exploitations to subsidize the "kommunist" scribblings of one Karl Marx...

what was yur point agin, besides making the most absurdly banal & misdirected paraphrasing in the history of ZH commentary?!?!?

AldousHuxley's picture

Look up who founded and funded University of Chicago the training ground for Friedmanites......Rockefellers

Rockefellers were also the largest shareholder for Chase National Bank....which is now JP Morgan Chase


free market competition for everyone, while banksters and super rich get all the benefit of increased productivity (work harder for less $) during 1980s because super rich saw rise of middle class with unions, education, etc so they wanted Americans to be put back into their slaves.



economics9698's picture

The Freidman “Chicago School” was designed, in my opinion, to attract the libertarian white males while covering up the theft of the Federal Reserve.  Only a very sharp student would be able to see the deception of Freidman’s monetary policy.  Because Freidman was main stream he ended up with a Nobel Prize while Rothbard languished at insignificant U for decades.

Freidman probably made the calculation to hide the theft of the Federal Reserve and become main stream and famous.  If he would have done a Rothbard he probably would not be known today.

AldousHuxley's picture

free market works perfectly only with perfect information to make informed choices.


in the real world you don't have all of the information and truth is closely guarded by the elite status quo.



well now the hidden information about when free market system is enforced (it is only enforced on the non-wealthy) and everyone wishes for free market principles to be enforced for someone else.