Saturday, September 8, 2007

Mr. Bubble Comes Clean.....Or Does He?


"The behavior in what we are observing in the last seven weeks is identical in many respects to what we saw in 1998,” Alan Greenspan told a room of Washington economic wonks yesterday. “What we saw in the stock-market crash of 1987, I suspect what we saw in the land-boom collapse of 1837 and certainly the bank panic of 1907."
As such, Greenspan labeled the current crisis a bubble in the beginning stages of popping. "The expansion phase of the economy is quite different” than the contraction phase, he said in a speech at the Brookings Institution. “Fear as a driver, which is going on today, is far more potent than euphoria."

Greenspan expressed his frustration at the Federal Reserve’s inability to control these crises with interest rates. Heh. He lamented the drastic hikes his Fed undertook in the mid-’90s to cool the tech sector, only to watch it blow up even bigger near the turn of the century. Greenspan said he believes the same tactic wouldn’t have helped today’s crisis.
"The human race has never found a way to confront bubbles,” said Greenspan, “and these bubbles cannot be defused until the fever breaks."
We’ve been noodling over Greenspan, his speeches and his actions as chairman of the Fed, for years… we couldn’t have outlined our central critique any better ourselves. Why did he wait until he was retired from the post to come clean?

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