Now he tells us. Alan Greenspan has come out from behind the cloud of gas where he had hidden himself for the past couple of decades to say in public what he should have said years ago when it might have mattered.
In his book, Mr. Greenspan complains that the Bush administration paid little attention to the conservative idea of fiscal constraint, and the Republicans in Congress were even worse. “They swapped principle for power,” he writes. “They ended up with neither.”
Mr. Greenspan understood that the Bush administration’s treasury secretaries were capons, but why did Mr. Greenspan snip off his own political testicles? As chairman of the Federal Reserve Board, he did not serve at the president’s pleasure. Mr. Bush could not fire him. So there was Greenspan, the one official concerned with economics who was in a position to talk but kept his mouth shut as debt mounted.
Given Mr. Greenspan’s adoring business press and his demigod status with politicians of whatever stripe, there was a solid chance that he could have stopped or at least mitigated the grotesque Bush tax cuts. Now he comes along to blame Mr. Bush and the circle of crackpots Mr. Bush surrounded himself with, but he might also have blamed himself.
His espousal of a balanced budget and pay-as-you-go government was not a questionable theoretical proposition. For the eight years of the Clinton administration he had been a successful collaborator in such a policy. He admired Clinton’s two effective treasury secretaries, Robert Rubin and Lawrence Summers. He knew it could be done, and yet he kept his yap shut when he should have been howling to high heavens.
Mr. Greenspan could have done more than howl. He could have taken corrective action. A central bank, at least to some extent, can counterbalance profligate borrowings by shrinking the money supply and pushing interest rates up. Had he done so, Mr. Greenspan would have heard howls aplenty from the White House and a Congress merrily in the act of cutting the taxes of the rich.
For years Mr. Greenspan confined his public utterances on the worsening housing bubble to polysyllabic imbecilities, never calling it a bubble, though it was he who was blowing the air into it, preferring instead the word “froth.”
On his book publicity tour Mr. Greenspan tells the Financial Times that froth “was a euphemism for a bubble,” explaining, in case we don’t get it, that “all the froth bubbles add up to an aggregate bubble.” His aggregate bubble, which he could have punctured long since, is threatening to become to our domestic scene what the Iraqi war is abroad.
This guy is still a hokum-meister. First he writes in his book, “We were willing to chance that by cutting rates we might foster a bubble, an inflationary boom of some sort, which we would subsequently have to address. … It was a decision done right.” But then The Wall Street Journal writes that “[Greenspan] attributes the housing boom to the end of communism, which he says unleashed hundreds of millions of workers on global markets, putting downward pressure on wages and prices, and thus on long-term interest rates.” This is hardly better than dada economics. Sure, blame the speculation-driven housing debt on the late Boris Yelsin.
After having put the responsibility for the housing mess on the death of communism, Mr. Greenspan next takes on the colors of some sort of liberalism by declaring that “the benefits of broadened home ownership are worth the risk.” In other words, without the bubble lower-income people would not have had a chance to own a home of their own. But did they really have such a chance?
If they “bought” their homes on such disadvantageous terms that they are unable to keep them, that is a fine kind of home ownership. Though the actual number is unknown, hundreds of thousands of lower-income families bought homes on a no-money-down basis through ruinous adjustable rate mortgages. It would be closer to the truth to say they did not buy these houses, but merely rented them at extortionate prices.
None of this seems to bother Mr. Greenspan, who told an interviewer something to the effect that the bubble has been worth it because, “Protection of property rights, so critical to a market economy, requires a critical mass of owners to sustain political support.” Someone might want to tell Alan that his critical mass of owners is on the verge of vaporizing faster than the polar ice cap.
Perhaps what will be the most remembered line in his book says that “the Iraq War is largely about oil.” No sooner had the reactions to that started popping off all over the place than Mr. Greenspan began to backtrack.
In an interview with Bob Woodward, Mr. Greenspan said he never heard the president or Vice President Cheney “basically say, ‘We’ve got to protect the oil supplies of the world,’ but that would have been my motive.” Mr. Greenspan said he made his argument to various administration officials, but one of them told him that they couldn’t talk about oil.
To borrow H. L. Mencken’s oft-quoted remark about money, “If they say it isn’t the oil, it’s the oil.”
Perhaps Mr. Greenspan’s most intriguing remark was made to The Wall Street Journal’s Greg Ip. He said, “Now it turns out politics is less important, domestically, than it was, because globalization is taking over an ever increasing part of the decision making process with the exception of national security.”
In other words it does not matter what the pygmies may think of me or whether you have your elections, whether you pick Hillary or Obama or some lefty fruitcake; you don’t get to decide the big stuff. The major decisions are made away from you by the big guys playing the big game sometimes in New York, sometimes in London, sometimes in Tokyo or Dubai, but always where you cannot see it or know what’s done until it is done, and then it doesn’t matter what you do because you cannot do or undo anything.
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