The United States is mired in a “once-in-a century” financial crisis which is now more than likely to spark a recession, former Federal Reserve chief Alan Greenspan said Sunday.
The talismanic ex-central banker said that the crisis was the worst he had seen in his career, still had a long way to go and would continue to effect home prices in the United States.
“First of all, let’s recognize that this is a once-in-a-half-century, probably once-in-a-century type of event,” Greenspan said on ABC’s “This Week.”
Asked whether the crisis, which has seen the US government step in to bail out mortgage giants Freddie Mac and Fannie Mae, was the worst of his career, Greenspan replied “Oh, by far.”
“There’s no question that this is in the process of outstripping anything I’ve seen, and it still is not resolved and it still has a way to go,” Greenspan said.
“And indeed, it will continue to be a corrosive force until the price of homes in the United States stabilizes.
“That will induce a series of events around the globe which will stabilize the system.”
I like Greenspan, and he’s probably correct in his current assessments here. The point about real estate prices needing to stabilize is the usual Greenspanish subtle way of saying one thing and implying a series of other things. In order for that to happen the mortgage market needs to stabilize as well, otherwise there will be insufficient buying demand. How that is going to happen is far from clear, which brings up my second point.
Greenspan here is being less than forthright on what the Fed should do in this context, and this implies a less than forthright consideration of what it ought to have done to prevent this situation while Greenspan was the Chairman. The Fed, after all, is responsible for monitoring the supply of money in the US, and companies like Bear Stearns and Lehman Bros were busy changing how the economy was being leveraged (creating money, in economic terms) for more than a decade. Until I see economists like Greenspan saying that this type of leverage needs to be forbidden, just as an addict needs to cold turkey, then I don’t think that the cowards in Congress are going to do their duties.
Yet again, we see why fiat currency is pernicious. I think Greenspan missed the mark in the article, though. We are facing stagflation, not merely a recession. The real culprit however, as much as I would like to blame the bad actors known as the Federal Reserve, is the congress. They are charged by Article 1 Section 8 of the U.S. Constitution with the power to “coin money, regulate the value thereof, and of foreign coin, and fix the standard of weights and measures”. They have abrogated that power, and we the people have let them. Until we the people stop being sheeple, we will continue to get this sort of congress and they will continue to shirk their constitutional duties, and we will continue to suffer the corrosive effects of fiat currency.
You may dismiss me as some benighted blogger, but I am not alone in my thoughts.
Read GOLD AND ECONOMIC FREEDOM by Alan Greenspan:
http://eldoradogold.net/pdf/greenspan_economic_freedom.pdf
#2…”sheeple”?…shades of William Cooper. By the way, your stash of junk silver in a safe place?
For all those who think that government isn’t the solution, it’s the problem, please note that $300 million and 20 years of lobbying by the financial services companies to repeal Glass-Steagall which occured in 1999 with Chairman Greenspan’s blessing is exactly what got us into this mess. I was working for Merrill at the time and we were told regularly that we should be supporting any candidate that would vote for repeal. Be careful what you wish for….
#1, Yes Greenspan comments make him appear to be an outside observer. Yet he played a keu roll in making money artifically inexpensive to get (through low interest rates); which led to the artifically high home prices; which led to the mortgage bubble bursting. Unfortunatly, he helped to create our current financial problems.
And by encouraging the repeal of Glass-Steagal he allowed investment companies to get into the business of bankrolling bad mortgages. In the past mortgages were owned by banks who were quite careful not to take on bad debt. Wall Street turned them into commodities to be bundled and sold without any real examination of the underlying value. Yet Greenspan talks about this as if he were on vacation when it happened.
Catholic Mom,
I do think that Government is the problem and not the solution. You are looking at only one layer of regulation that is the tip of the iceberg of government control/influence over the Nation’s monetary structure.
“government is the problem and not the solution” sounds like a slogan more than wisdom. If Greenspan had allowed for a higher interest rate on bonds, perhaps outside investors would invest in the United States.
John, it is not a slogan it is fact and Biblical Wisdom.
4 So all the elders of Israel gathered together and came to Samuel at Ramah. 5 They said to him, “You are old, and your sons do not walk in your ways; now appoint a king to lead [a] us, such as all the other nations have.”
6 But when they said, “Give us a king to lead us,” this displeased Samuel; so he prayed to the LORD. 7 And the LORD told him: “Listen to all that the people are saying to you; it is not you they have rejected, but they have rejected me as their king. 8 As they have done from the day I brought them up out of Egypt until this day, forsaking me and serving other gods, so they are doing to you. 9 Now listen to them; but warn them solemnly and let them know what the king who will reign over them will do.”
10 Samuel told all the words of the LORD to the people who were asking him for a king. 11 He said, “This is what the king who will reign over you will do: He will take your sons and make them serve with his chariots and horses, and they will run in front of his chariots. 12 Some he will assign to be commanders of thousands and commanders of fifties, and others to plow his ground and reap his harvest, and still others to make weapons of war and equipment for his chariots. 13 He will take your daughters to be perfumers and cooks and bakers. 14 He will take the best of your fields and vineyards and olive groves and give them to his attendants. 15 He will take a tenth of your grain and of your vintage and give it to his officials and attendants. 16 Your menservants and maidservants and the best of your cattle and donkeys he will take for his own use. 17 He will take a tenth of your flocks, and you yourselves will become his slaves. 18 When that day comes, you will cry out for relief from the king you have chosen, and the LORD will not answer you in that day.”
19 But the people refused to listen to Samuel. “No!” they said. “We want a king over us. 20 Then we will be like all the other nations, with a king to lead us and to go out before us and fight our battles.”
Our founding fathers worked hard to limit government knowing that it is a necessary evil in this fallen world. But like the Hebrews we will keep making the same mistakes, it is our fallen nature.
dont know why the second half of my #9 post was bold.
Sorry, #9 post reference is 1 Samuel 8:4-20
Withasword, although I share the same anarchic sentiments, it does seem as though God did give the Israelites a king. If we weren’t sinners, perhaps I’d agree that we don’t need government. I’d check our Romans or remember that quote about giving to Ceasar.
I’d note that it doesn’t seem that goverment is the problem: it is human sinfulness. I also make a distinction between kings and republics.
Of course, when you eliminate progressive taxes, you create lots of small monarchies along the way….
Hopper,
Again I point to 1 Samuel 8:4-20. Anytime you put fallen humans in a position of power/authority over others, there will be problems. Unfortunately, we refuse to look to God as the source of authority, (and we mankind never will in this world) and so we need government, but as little as possible. That is why our founding fathers put such an emphasis on self government and the need to be a Christian society.
“Providence has given to our people the choice of their rulers, and it is the duty as well as the privilege and interest of our Christian nation to select and prefer Christians for their rulers.”
John Jay
First Chief Justice of the Supreme Court