Greenspan Tells It Like It Is................

On Sept. 18, Alan Greenspan was on Comedy Central’s The Daily Show pushing his book The Age of Turbulence . At 4:15 minutes into the interview , this exchange took place:
Jon Stewart: “When you lower interest rates, it drives money to stocks and lowers the return people get on savings.”

Alan Greenspan: “Yes, indeed.”

Stewart: “So they’ve made a choice -- “We would like to favor those who invest in the stock market and not those who [save]...”

Greenspan: “That’s the way it comes out, but that’s not the way [the Fed] think[s] about it.” Stewart: “Explain that to me. It seems to me that we favor investment, but we don’t favor work. The vast majority of people work, they pay payroll taxes, and they use banks. And then there’s this whole other world of hedge funds and short betting... y’know, it seems like craps. And they keep saying, ‘No, no, no, don’t worry about it, it’s free market, that’s why we live in much bigger houses.’ But it really is, it’s the Fed, or some other thing, no?”

Greenspan: “I think you’d better reread my book.”

Stewart: “Am I wrong that we penalize work by not making the choice to...”

Greenspan: "What a sound money system does is to stabilize all the elements in it and reduce the uncertainties that people confront. One thing all human beings do when confronted with uncertainty is pullback, withdraw, disengage, and that means economic activity, which is really dealing with people, just goes straight down."

Putting aside the question of whether we actually have a “sound money system” or not… let’s see how Greenspan’s comments stack up to yesterday’s market events…