Greenspan according to Binswanger

[Michael Stuart Kelly]

Here is an article by Binswanger I just read dated November 7, 2008. ARI apparently is now on a crusade to demonize Alan Greenspan.

Alan Greenspan vs. Ayn Rand and Freedom

As I have mentioned elsewhere, I do not consider Greenspan to be a betrayer of Rand, nor the villain that Objectivists-libertarians normally try to portray him as. I could go into the reasons, but that is for later.

Among all of Binswanger's venom in his article, some quotes really jumped out at me. Here is the first:

... he provided a laudatory dust-jacket blurb for a book attacking Ayn Rand (by a woman he had "irrevocably" condemned in print in 1968). Yet he repeatedly refused to contribute to or lend his name to the Ayn Rand Institute,

He, of course, means Greenspan's favorable comments on Barbara Branden's The Passion of Ayn Rand. What I find telling with this complaint is:

1. Why would ARI want Greenspan to lend his name to it if he was the destroyer of liberty Binswanger claims him to be? Just for the record, Binswanger's article ends:

If Greenspan had set out deliberately to destroy freedom, he couldn't have done a more thorough job of destruction.

2. Rand was friends with Greenspan up to her death. I wonder if it ever occurred to the ARI Demonizer Corps that maybe she had her reasons? Even the most generous interpretation of the following quote from Binswanger makes Rand out to be a flaming idiot all the way back to the 70's:

I can't say I knew Alan Greenspan, though, being an associate of Ayn Rand, I met him a few times in the 1960s. But by 1970--almost 40 years ago--I and a couple of other Objectivists in that circle already realized that Greenspan was compromising on her philosophy.

He is essentially saying that Rand did not perceive what Greenspan was doing.

Heh.

(Why do I keep hearing in my mind, "Momma loved me best!"? )

But what's even worse, look at the following quote from The Objectivism Reference Center called The Alan Greenspan Timeline:

December 16, 1981: President Reagan creates a National Commission on Social Security Reform and appoints Greenspan as its chairman.

Seeing how Rand died a two and a half months later, is it possible that The ARI Demonizer Corps did not advise her of this? I find it inconceivable that they did not. Yet there is no record of her denouncing Greenspan.

But here is the weirdest thing of all in Binswanger's article:

Did he not read the very book he published in--Capitalism: The Unknown Ideal?

From "Common Fallacies About Capitalism," in that book:

"All government intervention in the economy is based on the belief that economic laws need not operate, that principles of cause and effect can be suspended, that everything in existence is 'flexible' and 'malleable,' except a bureaucrat's whim, which is omnipotent; reality, logic, and economics must not be allowed to get in the way. This was the implicit premise that led to the establishment in 1913 of the Federal Reserve System . . ."

Er...

"Common Fallacies About Capitalism" was written by Nathaniel Branden. It doesn't matter if Binswanger does not attribute the quote. He needed Nathaniel Branden to try to support his point because he had nothing from Rand.

Heh. Heh. Heh.

There's a lot of work to do to spread Rand's ideas. Demonizing Greenspan will not do it. All it does is make that voice, "Momma loved me best!", all the louder and make ARI look all the sillier. (They do good work sometimes, but this stuff tarnishes it badly.)

This mess speaks for itself so I will not go into it item by item. Let those who believe in it believe in it. More cult crap that makes Objectivism so beside the point for most people. I am just highlighting some of the cracks in The ARI Demonizer Corps' munitions so readers can think about Greenspan for themselves with a more informed view of his attackers.

Michael

[Chris Grieb]

Michael; Good post.

I must add that I think Objectivists have good reason to attack Greenspan. I don't think Binswanger has raised them.

I must add that I think the ARI crowd don't like him because he has made a name for himself.

I have not recently seen the attacks Binswanger made on George Riesman who fell out with the ARI folks because he raised questions about the salary Binswanger was paid.

[Brant Gaede]

Greenspan made some notable mistakes as head of the Federal Reserve.

--He helped bail out a big hedge fund, LTCM, run by Nobel incompetents sending the message that the Fed would backstop risk taking in financial speculations if you were big enough.

--He supported the legal breakdown of the barrier between regular banking and investment banking.

--He grossly over-inflated the money supply in the fall of 1999 in response to Y2K fears leading to a run up in equity prices that subsequently collapsed the following spring. This was followed by a +2 year Bear Market.

--Trying to avoid a recession he ran interest rates too low too long breaking that Bear Market but setting up the calamity we are now in the midst of.

Basically he never took away the punch bowl when the party got over-heated so the garbage never really got flushed out of the economy.

Essentially he took the job the villains tried to get Galt to take in AS. The difference is that Galt was outside and antagonistic to the dominant society while Greenspan was not.

--Brant

[Michael Stuart Kelly]

Brant,

I keep reading that kind of analysis, but it doesn't grok right. I believe if you put all the things Greenspan did right on a scale and weigh it against his mistakes, the mistakes will be minuscule.

I certainly do not hold him responsible for the present crisis. Bankers trying to make equities out of derivatives and politicians backing them (and/or forcing them) with laws did that, in addition to government spending.

It's a shame we are not living in a novel. Things would be simpler. Just blame Greenspan for not being Galt and it's all resolved.

So where's Galt?

Michael

[syrakusos]

As I have mentioned elsewhere, I do not consider Greenspan to be a betrayer of Rand, nor the villain that Objectivists-libertarians normally try to portray him as. I could go into the reasons, but that is for later.

We had 20 years of uninterrupted economic growth in part because Alan Greenspan was at the helm of the FRB. Yes, it is easy to claim that he sanctioned our destroyers by enabling an evil system. It is just as easy to claim that you do that when you mail a letter. The guy is an economist. He got one of the best jobs an economist could have. I have few complaints about the FRB -- aside from its very existence, of course. When you look at the price of gold in 1997-1999, you see the consequences of having a commited free market economist as chair of the FRB. In fact, if you read the mass of papers produced by FRB economists over the last generation, it is clear that Chicago Monetism is the middle of the road. In the long run, Keynes was dead.

Should there be a Federal Reserve Bank? No. Neither should there be Yellowstone National Park, NASA, or the interstate highway system, public schools, or city garbage collection ("material recycling" here in Ann Arbor). Where do you start? And once you start, where does it stop? If the ARI wants to call a general strike, then that would absolute, would it not? Short of a general strike, holier-than-thou achieves only self-gratification.

[syrakusos]

Greenspan made some notable mistakes as head of the Federal Reserve. ... Essentially he took the job the villains tried to get Galt to take in AS.

And, yes, all of that is true, as well. Can an Objectivist work as a public school teacher?

Can an Objectivist work for any government-regulated, i.e., government-supported, business?

Back in 1986-87, I was the technical writer for a software firm that actively sought state government contracts. They had many other customers, businesses, mostly, and nominally unregulated ones at that. When they put in the first bid on a state contract, should I have quit?

Let's put our cards on the table. What do you do for a living?

[Brant Gaede]

I thought I made myself clear. It was okay for Greenspan to take the job but you have to be able to take away the punch bowl. He never did.

Almost all economic activity in this country is tainted by government this and that and doesn't mean you can't be a public school teacher or teach at a state college or work for a public utility or sell a book to a public servant and put that royalty in your pocket. I personally do not have remunerative employment or receive any government checks. I'm a financial speculator by and large sitting on my hands waiting for an inflection point. For now the crazy volatility makes it too dangerous. You can lose thousands of dollars in 20 minutes using ETFs. Senior members of my family have enjoyed various government jobs. My late step-mother was an immigration judge who worked in that and subsidiary jobs since the 1930s. She was once offered lucrative employment in the private sector to represent people trying to stay legally in this country. She found that onerous and turned it down. If she had taken that job would her remuneration been less tainted? It would have been essentially parasitical on immigration law.

--Brant

Edited December 4, 2008 by Brant Gaede

[Chris Grieb]

Brant; That is a good post.

I must add that I wish your mother had been able to work as an immigration lawyer. As a recent issue of Reason pointed out that being a legal immigrant is very hard and good immigration lawyer make is less difficult.

[Mike11]

Nice deconstruction MSK.

[Brant Gaede]

Brant; That is a good post.

I must add that I wish your mother had been able to work as an immigration lawyer. As a recent issue of Reason pointed out that being a legal immigrant is very hard and good immigration lawyer make is less difficult.

Her attitude was that the law was clear and if you needed a lawyer to get around the law--as opposed to making sure you had your ducks lined up properly--that was finagling. Under certain circumstances as a private attorney in immigration law that is precisely what she would have had to do and she couldn't. She didn't believe in getting around the law. Now my own attitude as such a lawyer would have been quite different, but only if I could select my clients. But as a practicing attorney the government would from time to time require me to represent some people who couldn't afford to hire me. One of her fellow judges, this was 1971, ordered John Lennon deported because of a MJ conviction in Britain. This judge loved John Lennon, but an immigration judge is not appointed by the President and confirmed by the Senate. He merely has the highest government pay grade and can be demoted or fired. This was appealed and a Federal Court next up the line threw that out--incorrectly, and the government declined to appeal that, probably for political reasons, so Lennon got to stay in this country and get gunned down in 1980. Ironical in the extreme. He'd probably still be alive except for that.

--Brant

[Darrell Hougen]

I keep reading that kind of analysis, but it doesn't grok right. I believe if you put all the things Greenspan did right on a scale and weigh it against his mistakes, the mistakes will be minuscule.

I certainly do not hold him responsible for the present crisis. Bankers trying to make equities out of derivatives and politicians backing them (and/or forcing them) with laws did that, in addition to government spending.

It's a shame we are not living in a novel. Things would be simpler. Just blame Greenspan for not being Galt and it's all resolved.

Michael,

I wouldn't call Greenspan's mistakes "minuscule." I don't have serious philosophical qualms with him. In fact, I'm not really sure to what degree philosophical judgments entered his job. Also, it is hard to second guess a person's decisions when you're not in the driver's seat. But, it just seems to me that he let interest rates vary too wildly. We went down to 2%, then up to 6%, then down to 1% again and back up. (These are approximate figures.) Was it really necessary to kill the internet bubble? It would have died eventually of its own accord. And where did it come from in the first place?

My point is that economic downturns are impossible to avoid and I don't think it is the job of the Fed to try to fine tune the economy. One could argue that by trying to avoid short term pain, the Fed made things worse. Just like a firefighting policy that does not allow any fires and thereby allows an enormous build up of densely packed, sick and dying trees, an economic policy that doesn't allow periodic downturns allows a build up of sick and dying companies. And, just as a fire that comes to an overgrown forest turns into an inferno, devouring tens or hundreds of thousands of acres, an economic downturn that comes to a sick economy turns into a complete economic meltdown, potentially throwing millions of people out of work.

Greenspan was known as the "Wizard of Wall Street" because he managed to steer clear of serious recessions. But, in all likelihood, he made our current situation worse. I was initially sympathetic to him because I knew that he was an Objectivist. But, over the years I have come to view him as somewhat average. Nothing in his career leads me to believe that he was any kind of genius.

On the other hand, I am disgusted with attacks on him by Objectivists. This notion, promoted by Rand herself, that your worst enemy is the person that has slightly different views than you is seriously misguided. The fact that Greenspan perhaps didn't strictly follow the party line in his ideas or policies, does not make him the enemy of Objectivism or the proper object of vilification.

Rand was absurdly concerned that a small error in conveying her philosophy would tarnish the entire work and make it incomprehensible. But, all of the evidence from history and science is that the honest pursuit of fact or truth eventually converges on the truth. If this were not the case, science, for example, would be impossible. She would have us believing that because Newton's theories were not correct under all conditions, it would have been impossible to develop the Theory of Relativity or Quantum Mechanics. After all, those theories are nearly the same as Newton's theories in certain limits, so Newton was surely standing in the way of discovering those later theories. The truth is that Newton's theories, far from leading people astray, paved the way for later developments.

Rand's view, in fact, represents incredible hubris on her part. She apparently believed that no one that came after her could possibly comprehend, much less improve upon, her philosophy and that it must therefore be treated as the revealed word of Rand, never to be questioned or revised. Of course, whenever questioning the ideas of a great thinker, we should make sure that we thoroughly understand them before embarking upon their improvement. But, that does not mean that we should hesitate to make our ideas known, once we are reasonably confident in them. If they are wrong, they will be shot down by critics. And if not, (as Rand said) we will be, "the permanent benefactor of humanity."

Darrell

[Michael Stuart Kelly]

Greenspan was known as the "Wizard of Wall Street" because he managed to steer clear of serious recessions. But, in all likelihood, he made our current situation worse. I was initially sympathetic to him because I knew that he was an Objectivist. But, over the years I have come to view him as somewhat average. Nothing in his career leads me to believe that he was any kind of genius.

Darrell,

I would like to repeat a post I made elsewhere last month.

I would agree with your appraisal of Greenspan if we were in the financial context of the industrial revolution. But we are in the middle of the information revolution. This creates new principles and contexts, for instance instant and massive delivery of abundance across jurisdictions (countries).

Greenspan's orthodox Objectivist critics are still stuck in the industrial revolution when they think about money and property and him. (This is actually a good thing because it makes it easier for the world to pass them by.) I personally think he was a pioneer and genius who opened new paths that will have beneficial results for ages (despite his mistakes).

Before getting to the long post, I want to mention a statement of yours that resonates all the way down to the core with me.

This notion, promoted by Rand herself, that your worst enemy is the person that has slightly different views than you is seriously misguided. The fact that Greenspan perhaps didn't strictly follow the party line in his ideas or policies, does not make him the enemy of Objectivism or the proper object of vilification.

Rand was absurdly concerned that a small error in conveying her philosophy would tarnish the entire work and make it incomprehensible.

Now here is the long one. Many of the arguments I want to mention right now are already addressed there. The only thing I want to add right now is about the mindset.

If you take a brilliant horse-and-buggy driver and put him in the pilot's seat of an airplane, he will see that certain principles like law of identity, etc., remain unchanged, but he will not be able to pilot the plane, no matter how great a horse-and-buggy driver he was, until he uses and learns new standards and techniques. This even means giving up some of the old ones, like feeding the horse. But he will need to understand that aerodynamics creates a different reality context with brand new principles than animal-drawn wheel transport. The refusal to acknowledge this will keep him from taking off forever.

The same thing applies to modern finance with globalization and informatics.

Blame Federal Gov't, Not The Fed, For Subprime Mortgage Problems

By Jeffrey Rogers Hummel and David R. Henderson

From the article:

Many prognosticators on the economy blame the Federal Reserve for the current subprime crisis. But a careful look at the evidence shows that monetary policy, whatever its faults, did not cause the subprime mess.

These guys are libertarian thinkers.

It's good to see that not all people in our neck of the woods demonize Greenspan. I personally admire the guy.

Of course it set some libertarian blogs to spinning in overdrive. I even came across this because I subscribe to the Mises newsletter and there was an article by George Selgin dealing with this called Guilty as Charged. Although Selgin did not agree with Hummel and Henderson, he did make some intriguing statements:

David Henderson and Jeff Hummel have managed to ruffle quite a few Austrian feathers with their recent Cato briefing paper, and no wonder: that paper claims not only that Alan Greenspan's Fed was innocent of any role in encouraging the housing boom but that Greenspan had actually managed to do something Austrian monetary economists have long claimed to be impossible, namely, solve the monetary-central-planning problem.

. . .

David Henderson and Jeff Hummel deserve to be congratulated for their eloquent defense of Alan Greenspan. It is, I think, as compelling a defense as could be raised on his behalf. Why two anti-central-bank libertarians would bother to undertake such a defense—and a pro bono defense at that—is an interesting question that several bloggers have raised. Personally I have no doubt that they have done it because they sincerely believe Greenspan to be innocent, and that claims to the contrary are based on bad monetary analysis.

But whatever their purpose they've performed a valuable service not just to Greenspan himself but to monetary economics, for in putting Greenspan's actions in the most favorable possible light, they have posed a challenge to those of us who insist that a persistently sound central-banking policy is not only unlikely but beyond the ken of mere mortals, and that even the best of possible central bankers must eventually steer the economy he is piloting into disaster.

I am passing over all the technical stuff in this post because my point is on scapegoating, not monetary theory. It's time for the scapegoating to stop and this is a refreshing contrast to a horrible scapegoating analysis by a recent ARI Op Ed:

The Maestro vs. the Market

By Alex Epstein and Yaron Brook

Alan Greenspan’s entire tenure at the Federal Reserve was one devoted to distorting market outcomes in the pervasively controlled financial markets, including the mortgage market. The Fed by its nature wields enormous power over the market as it dictates the money supply and interest rates, which in turn determine lending, borrowing, and bank leverage throughout the economy. Early in Greenspan’s tenure, some expected the onetime opponent of the Fed and supporter of a gold standard to minimize the Fed’s distortion of markets. Instead, Greenspan became our Manipulator-in-Chief, repeatedly inflating the money supply and artificially lowering interest rates to allegedly magnify prosperity.

. . .

Greenspan is entitled to change his mind, of course; but it is intellectually dishonest to pretend that the market he manipulated for 20 years was genuinely free.

. . .

But to listen to today’s Alan Greenspan talk about free markets is like listening to a Chinese censor talk about free speech.

Manipulator-in-Chief? Market he manipulated? Intellectually dishonest? Chinese censor?

Gimmee a break!

This crap shows an appalling lack of understanding of what the Fed does and how it functions in addition to the scapegoating. The oversimplifications in that Op Ed are embarrassing.

Getting back to the position taken by Hummel and Henderson, I am heartened to see some very knowledgeable economists of the free-market persuasion discussing these issues by looking at them from an angle that does not simply repeat slogans, ignore technology or scapegoat a single person.

I am convinced that globalization and informatics require some deep economic premise-checking, just like the information revolution on the Internet requires some deep intellectual property premise-checking. There are some new principles that need to be looked at, such as man-made abundance is man-made, but it is also abundance. Currently there is such a huge amount of abundance that it creates a context all its own, with its own nature. Also, instantaneous delivery mechanisms require instantaneous access to assets, and this demands a freer access than those stored with geographical limitations (i.e., physically), but by doing so, new assets are created exponentially. This goes for both information and capital.

This is not to say that private property no longer exists or anything of the sort. But property never had instantaneous delivery built into it before, so the nature of certain kinds of property is changing. The good news is that this creates real wealth in an enormous amount of abundance.

Anyway, this is a different discussion and a long one. Leave it to say that I believe that Greenspan managed to incorporate this new reality of informatics and abundance in his thinking, saw an opportunity to make a lasting difference, and did a brilliant job of implementing it in practical terms.

He was a pioneer.

Pioneers make mistakes and Greenspan was no exception. When dealing with enormous abundance with immediate access, a small mistake has enormous impact. (I believe encouraging too much credit on flimsy assets was one.) But pioneers also blaze trails. The trail Greenspan blazed is here to stay and we are all living with a huge amount of wealth we don't even acknowledge because of it. We just take it for granted as we pull out our plastic or punch in numbers to pay for stuff we never imagined possible 40 years ago except in science fiction.

So it is good to see intelligent free-market people starting to embark on this new path to see where it leads. The scapegoating and oversimplifying mentality will eventually be left behind as Greenspan's bountiful legacy becomes clearer to later generations. Still, it's an irritation to see primitive tribal attitudes flourishing under the banner of reason.

Michael

[BaalChatzaf]

Greenspan: I am shocked, shocked! to find out that the financial community is a bunch of short sighted greedy bastards.

Some surprise. Government policy and its associated fiscal and monetary policies (manufactured in Washington D.C.) were a tangled collection of perverse incentives.

Ba'al Chatzaf

[Brant Gaede]

The information economy is nice and greatly influential and will make this a better world, but as part of the economy itself only a small part and will stay only a small part. As for globalization it's more like globalization if not magnification and acceleration of financial problems. Greenspan was seduced by Michael's thesis many years ago and it helped make him oblivious to the danger of an overheated economy and the need for the bankruptcies which will consequently hit the US big-time in 2009.

--Brant

[Michael Stuart Kelly]

Brant,

The information revolution is not a thesis. It's happening all around us.

Your plastic credit card is but a small indication money-wise.

btw - Did you know you could take a debit card to an ATM machine in Brazil and receive Brazilian reals right on the spot from your account here in the States?

I repeat, that's not a thesis.

Michael

[Brant Gaede]

Brant,

The information revolution is not a thesis. It's happening all around us.

Your plastic credit card is but a small indication money-wise.

btw - Did you know you could take a debit card to an ATM machine in Brazil and receive Brazilian reals right on the spot from your account here in the States?

I repeat, that's not a thesis.

Michael, I didn't say the "information revolution" was a thesis. Your implicit thesis is something else, that the "information revolution" is bigger with respect to the overall economies of the world than it really is. We are essentially talking about back-office operations, after all, and libraries.

--Brant

[Michael Stuart Kelly]

Your implicit thesis is something else, that the "information revolution" is bigger with respect to the overall economies of the world than it really is.

Brant,

This is not my theses. My thesis is that new elements have their own realities and that Greenspan is being judged by people who ignore those realities in the same breath they condemn him. They judge him using incomplete and/or unsuitable standards.

I most certainly do not believe that you replace one principle with another totally different one when progress happens. I believe you add to your knowledge, not replace it entirely. The new grows in relation to the old.

(btw - I agree that with you about much. We just use different words for some of the concepts from what I have read.)

We are essentially talking about back-office operations, after all, and libraries.

That's not what I've been talking about.

Michael

[Darrell Hougen]

...

... I am convinced that globalization and informatics require some deep economic premise-checking, just like the information revolution on the Internet requires some deep intellectual property premise-checking. There are some new principles that need to be looked at, such as man-made abundance is man-made, but it is also abundance. Currently there is such a huge amount of abundance that it creates a context all its own, with its own nature. Also, instantaneous delivery mechanisms require instantaneous access to assets, and this demands a freer access than those stored with geographical limitations (i.e., physically), but by doing so, new assets are created exponentially. This goes for both information and capital. ...

He was a pioneer. ...

Michael,

Just responding to a bit of what you wrote (which I did read previously on the other thread), I don't see the sense in which Greenspan was a pioneer. He did not create instant access to capital. That already existed or was created by others. I don't know what modernization he undertook at the Fed, but allowing progress to come to a quasi-government agency hardly seems pioneering.

Wealth was created at an exponentially increasing (or some other higher order function) rate before the existence of Greenspan and will continue to be created at an exponentially increasing rate as long as people are substantially free. The definition of property will not change. And, the role of the Federal Reserve will not change in the information age.

The role of the Fed is basically to maintain the value of the currency relative to other kinds of property so that it can be used as a medium for the storage and exchange of wealth. Setting rates too low, allows the dollar to become devalued relative to some other forms of property, leading to distortions. Setting rates too high causes the value of the dollar to rise, thereby depressing the value of other kinds of property and causing other kinds of distortions. Neither is good for the economy.

The Fed should probably be keeping interest rates within a narrow range, say 3-4%, related to the overall rate of economic growth. The Fed should not drop interest rates to extremely low levels simply to avoid short term economic pain. Periodic short recessions are good for the economy. And, by not dropping rates too low, the Fed would avoid the bubbles we have seen in recent years -- the internet bubble, the housing bubble -- each bubble bigger than the last. Who knows what the next bubble will bring.

The Fed has not succeeded in its essential mission of maintaining the value of the dollar. I admit that some of this is the result of Federal Government policies, but I just don't see Greenspan as a brilliant steward of the economy.

Darrell

[Michael Stuart Kelly]

Darrell,

Have you read Greenspan's bio? I confess that I have it, but I have not read it all yet. Instead, I read Bob Woodward's book on him. From the inside, he looks a lot different than from the outside. At the very least, he educated Bill Clinton and probably staved off a Jimmy Carter like inflation.

Greenspan invented ways to use the machine, not the machine itself. Saying, for example, that he did not invent instant access to capital is akin to blaming Bill Gates for not being IBM or inventing the computer.

As far as criticizing him for bubbles go, Monday morning quarterbacking is great. The pressures and alternatives on the inside at the time are not so clear.

I also have a perspective that I have seen all this up close from inside a foreign country. Something people here in the USA don't realize is the banking abroad is one thing and banking here inside the USA is another thing, almost as if they were on different planets. Yet the Fed impacts banking abroad about as much as BIS (Bank of International Settlements) does.

What happens abroad strongly impacts what happens here, even though the rules are different. The Fed does much more than sets the discount rate and federal funds rate. Those are just the things the media likes to mention because of their impact on the price of private loans to consumers and companies.

Later I might do some extra research and put together a list of what I consider Greenspan's achievements and innovating contributions were. (The Fed data system was informatized under his watch for starters. It would have been anyway, but he set a great deal of the criteria.)

I personally think Greenspan's greatest failing was to not believe in the incredible insatiable greed for the unearned that consumes some important quarters of the banking industry, so much so that they use tried to turn the meager equity itself at the start of the debt-made money snowball into a derivative and consume the crumbs along with the lion's share. He thought people were better than that and not so stupid.

As an aside, what the hell is a mortgage backed security? That's pure crap. Gobbledygook to confuse the unwary. There are only house backed securities, which those greedy bastards are now learning. And without the bailout, those banks would have been trying to do business with physical houses acquired by foreclosing on an angry and scared public in a market they helped to tank. (The government had its share of blame with regulations and Fanny Mae, etc., too, but that is far from the whole story.) The trouble is, setting aside all other considerations, you can't call a house anything but real estate (unlike what you can do to fancy up debt instruments), so it's awfully hard to play oceans of greed debt games with a house.

Michael

[Darrell Hougen]

Have you read Greenspan's bio? I confess that I have it, but I have not read it all yet. Instead, I read Bob Woodward's book on him. From the inside, he looks a lot different than from the outside. At the very least, he educated Bill Clinton and probably staved off a Jimmy Carter like inflation.

Michael,

I'll have to admit, I haven't read his book. My information comes from just watching the way he has handled the economy for the last 10-15 years. I'm not saying he is bad. He could have been much worse. And, I'm thankful that he wasn't worse. But he also could have been better.

Clearly, Greenspan is not the main culprit in the current crisis. His only "crime" was obliviousness to what was going on. What we're talking about here is fraud on an enormous scale -- home buyers, mortgage brokers, lenders, investment banks, rating agencies. They were all involved or looked the other way. Yes, some home buyers were just stupid, but then there's the guy with one bankruptcy, two foreclosures, a credit rating in the gutter that applied for and got a zero-down, no-doc loan on a nice house. Don't even try to tell me he didn't know what he was doing. He moved in in August, never made a payment, and was out by January. Nice free hotel. What a scam. And the lender must have known he would never get his money back. And the banks blithely packaged such loans together and sold them. And rating agencies hired PhD's to create models that told them there was very little risk when you packaged 100 of these things together. And banks bought insurance contracts on them at pennies on the dollar. And even banks that didn't own them bought insurance on them so they could collect when the crash came. And now Uncle Sam is picking up the tab by shelling out tens of billions through AIG (the company that sold the insurance to pay for their resort vacations).

At any rate, it didn't help to keep interest rates so low. The housing bubble might not have grown so big so fast if the Fed had followed a more conservative policy. That's all. That's my point.

Darrell

[Robert Campbell]

I'm coming late to this conversation because I've been grading project reports in Experimental Psychology. Just finished 17 of 'em... Trying to do a complete empirical study in one semester borders on crazy, but we keep managing somehow.

I don't have nearly the technical knowledge to do a full-dress evaluation of Alan Greenspan's record at the Fed. Even those possessed of such knoweldge may be a little too close to certain events (such as the recent mortgage meltdown) to see them in adequate perspective.

For what it's worth, I suspect he should have taken away the punchbowl, more than once... and I wish he hadn't tried to prop up Social Security.

In any event, I am inclined to take Jeff Hummel's analysis seriously. Dr. Hummel is a historian by profession, but he's no slouch on the money and banking stuff.

By contrast, the present ARIan effort to blame everything that's gone wrong on Greenspan is as risible as the Leftist effort to interpret his recent confessions of doubt as proof that capitalism is discredited once and for all.

The ARIans really are going full-court on this one—Harry Binswanger's piece, Epstein and Brook's blast, and at least one recent interview in which Yaron Brook denounces Mr. Greenspan at length, as a traitor to Ayn Rand.

Too bad that, back in 1970, Ms. Rand failed to appreciate Harry Binswanger's superior insight into Mr. Greenspan's failure to exemplify true Objectivism. She should have put Dr. Binswanger in charge of The Objectivist while she was it, not to mention included him in her will...

Robert Campbell

[Neil Parille]

Greenspan was an advisor to Nixon and also became Ford's Chairmen of the Council of Economic Advisors in 1974. As I recall, he headed the Social Security Commission in 1982, the year Rand died (not sure before or after Rand's death).

I imagine that Rand thought that he would do more harm than good in the first two positions (a reasonable thought) notwithstanding his compromise with Objectivism.

-NEIL

[Brant Gaede]

Greenspan was an advisor to Nixon and also became Ford's Chairmen of the Council of Economic Advisors in 1974. As I recall, he headed the Social Security Commission in 1982, the year Rand died (not sure before or after Rand's death).

I imagine that Rand thought that he would do more harm than good in the first two positions (a reasonable thought) notwithstanding his compromise with Objectivism.

I imagine that she didn't. We will not be called as witnesses.

--Brant

[Neil Parille]

George Reisman said at a Mises Institute talk a couple years ago that he only saw Greenspan once at a Mises Seminary in NYC (when he brought Rand).

In addition, he doesn't mention Mises or (the best I can recall) Austrian economics in his three essays in CUI.

Since Rand favored Austrian economincs, it appears that she gave this guy quite a pass.

-NEIL

[Brant Gaede]

George Reisman said at a Mises Institute talk a couple years ago that he only saw Greenspan once at a Mises Seminary in NYC (when he brought Rand).

In addition, he doesn't mention Mises or (the best I can recall) Austrian economics in his three essays in CUI.

Since Rand favored Austrian economincs, it appears that she gave this guy quite a pass.

Isn't it more appropriate to say Rand favored capitalism therefore von Mises rather than she ever demonstrated in print any understanding of or interest in the business cycle? I'd bet even money she never really read Human Action or any but his really short books. She never evidenced any nuts and bolts economic competence I'm aware of.

--Brant