Given his track record, Alan Greenspan's publication of a guide to economic forecasting will likely prove as successful as Lance Armstrong's guide to drug-free cycling. As Bloomberg reports [4], Greenspan's new book "The Map and the Territory" is about as credible as art history by Mr. Magoo; as it pretends to tackle the subject of forecasting while saying next to nothing about the author’s historic failure to reduce the risks leading to the crisis, which he calls "almost universally unanticipated." Bloomberg's Daniel Akst sums it up best with his concluding sentence: "'The Map and the Territory' is an infuriating book, one that will leave readers wondering how its author could have come all this way and yet remain so hopelessly lost." Indeed...
Via Bloomberg, [4]
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As Fed chairman until 2006, practically the eve of the financial crisis, Greenspan couldn’t see the storm on the horizon.
Despite his mastery of the techniques described at somewhat numbing length in his book, he failed to draw any useful conclusions from a host of indicators that were pointing to trouble.
Omens were plentiful: the bubble in housing prices, the gross inadequacy of banking capital, the systemic risks of money-market funds, the explosive dangers of complex derivatives, the rise of an enormous and poorly regulated shadow banking system, the transparent pandering of the bond-rating companies, the collapse in mortgage-lending standards and the massive overleveraging of U.S. consumers.
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“The Map and the Territory” pretends to tackle the subject of forecasting while saying next to nothing about the author’s historic failure to reduce the risks leading to the crisis, which he calls “almost universally unanticipated.”
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Greenspan’s plodding text oscillates maddeningly between equivocation and chutzpah. He implies that it was a mistake to bail out the big banks in 2008, yet doesn’t say what he would have done instead, leaving us to wonder if, in Ben Bernanke’s shoes, he would have let the global financial system go up in flames.
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But this is an odd concern from the man whose actions as Fed chief gave rise to faith in the “Greenspan put,” the notion that, while he was in office, the central bank would rush to float sinking markets with lower interest rates whenever they faltered.
“The Map and the Territory” is an infuriating book, one that will leave readers wondering how its author could have come all this way and yet remain so hopelessly lost.