Living History

[Dubious]

please, oh please - live until your 120...

Living history - He is a national treasure - should be mounted in the Smithstonian (Chinastonian) Musuem of Old American History - caption - "Cause of the End of the United States of America Empire".

(quote TWO days AFTER a major stock market peak #1 below - a buy on the dip idiot - that I love so much) - as you remember 4 days before the downturn in 2000 famous quote "Corporations on are good footing, the economy is expanding at an ever increasing rate". - Love the guy!!! Naz only lost 78% - at least it was not 98% like Conehead - really hard for an index to go down 78% thou - one of my favorite calls of all time.

I digress...read and heed...http://cunningrealist.blogspot.com/2005/03/maestro-living-history.html

1. "It is very rare that you can be as unqualifiedly bullish as you can be now." This famous statement by Greenspan appeared in The New York Times on January 7, 1973, when he was president of the economic consulting firm of Townsend Greenspan. It was just two days after the 1973 stock market peak. Over the next two years inflation and interest rates exploded, and the market declined 50 percent in the worst economy since the Crash of 1929 and the subsequent Great Depression.

2. Greenspan's background with the Savings and Loan Crisis in the 1980's is a classic. Bill Fleckenstein, a successful professional money manager, comments on it here in an article I recommend reading in its entirety. The following three paragraphs are from Fleckenstein:

The last thing that Alan Greenspan did before he left Townsend Greenspan to become Fed Chairman, was to opine on the S&L industry, and more precisely Charlie Keating's S&L. What follows is a vignette from the book "Inside Job," written by Steven Pizzo, about an encounter in 1984 between Greenspan and Ed Gray, who was the Federal Home Loan Bank board chairman.

"Gray received a letter from respected economist Alan Greenspan telling him he should stop worrying so much. Greenspan wrote that deregulation was working just as planned, and he named 17 thrifts that had reported record profits and were prospering under the new rules. Greenspan wrote the letter while he was a paid consultant for Lincoln Savings & Loan of Irvine, CA, owned by a Charles Keating, Jr., company. Four years after Greenspan wrote the letter to Gray, 15 of the 17 thrifts he'd cited would be out of business and would cost the FSLIC $3 billion in losses."

In addition, in 1985, Greenspan pronounced specifically that the management of the Keating thrift enterprise was "seasoned and expert" with a "record of outstanding success in making sound and profitable direct investments."

3. Greenspan played an infamous role in the stock market crash of 1987. Having become Fed chairman just a few months earlier, he agreed to an interview by Fortune magazine in which he made some shockingly naive comments about the dollar. The interview appeared in print late in the week, roiling the currency and bond markets, and the stock market crashed when the market opened the next week. Greenspan did manage to get one thing right from this disaster: He never gave an on-the-record interview to any publication again. An excellent account of this by Jude Wanniski, which debunks Bob Woodward's absurdly fawning portrayal in Maestro of Greenspan's role in the 1987 crash, appears here.

4. Greenspan's comments in early 1996 about "irrational exuberance" are well-known. Not only did he do nothing to act on this, he turned into a stock market cheerleader and never looked back. In 1999, he injected an epic amount of liquidity into the financial system to cushion against a Y2K problem that never happened. We're still suffering from the hangover of that malinvestment and overcapacity, and will be for many years.

5. As the bubble that inflated on his watch then deflated after 2000, never a discouraging word was heard from Greenspan in his speeches or Congressional testimony. The economy was always coiled for imminent strength, any type of weakness was transient, and the productivity miracle was permanent.

6. The minutes of Federal Reserve meetings from 1999 were released recently. These offer a fascinating glimpse into what was happening behind the scenes at the Fed at the time of the 90's bubble, and what they show is incredible. For the past several years, in many speeches and in testimony before Congress, Greenspan has denied that he knew there was a bubble, and has cast doubt on the ability of the Fed to recognize a bubble as it is building. But from the minutes of one 1999 Fed meeting, we now know this is false. Bill Fleckenstein discusses this here under "Truth outed by a Fed transcript" which is a must-read.

7. Partially because he kept interest rates too low---at "emergency" levels---for too long, he's now being forced to raise interest rates due to rising inflation and demands from our overseas creditors---just as the economy is slowing. Noticed the price of a gallon of gas recently? Wait until you see it this summer, along with your air conditioning bill. You can thank all that easy money of the past few years; oil is denominated in dollars, and OPEC is demanding higher prices to compensate for the decreasing value of the dollars we give them for their oil. And since the majority of wars are fought over natural resources, we may not have seen the tragic results of higher oil and commodity prices that are due largely to Greenspan's actions. I'll write a column on this in the near future.

8. Possibly the most insidious result of all the easy money is the destruction of savers and the effect of that on the nation's morality. One reason Americans have never saved less is because Greenspan has forced them, via absurdly low interest rates, into risky investments---such as the stocks that Wall Street sells to the public. Yet Greenspan has the gall to opine about how Americans should save more. Due in large measure to his actions, the qualities of thrift, financial prudence, and "putting something away for a rainy day"---integral parts of our nation's history and identity---have been destroyed. Instead, we have a national obsession with stocks and real estate, and teenagers wander the malls carrying multiple cell phones and credit cards.

I could go on and on about Alan Greenspan. The Chairman of the Federal Reserve wields extraordinary over the lives of all Americans, and arguably most of the rest of the world. He is an unelected official---and, as we've seen, virtually unaccountable for his actions. One reason the Federal Reserve was created was to separate monetary policy from elected officials, who obviously can never be trusted with the levers of money creation. But as Senate Minority Leader Harry Reid recently observed, Greenspan has acted like a politician who's up for re-election every year: "I'm not a big Greenspan fan. ... I voted against him two times. I think he's one of the biggest political hacks we have in Washington," Reid said.

Longtime Fed Chairman William McChesney Martin once said that it is the Fed's job "to take away the punch bowl just when the party is getting really good." Alan Greenspan has failed miserably at this. He has never met a bubble he did not like, and has acted like a teenager at a party who spikes the punch bowl with alcohol. I believe at some point in the next several years, public debate about the role of the Federal Reserve as an institution will take place. The public may be very surprised at what it learns.

Greenspan's defenders are fond of telling the rest of us what a great public servant he is, and reminding us of how much more money he could have made over his career had he stayed in the private sector. I'm not sure his private consulting clients could have taken too much advice like his epic 1973 doozy, but the rest of us would have been better off.

Make no mistake about it: You should watch and listen to Alan Greenspan as much as possible while he's still around. It's rare one gets a chance like this. He's living history, for he is our John Law---and history will treat him as such.