<p>“woah, thats some diatribe, asleeacn. i didnt read most of it, but alan greenspan is the man. hes one of the few things reagan did right.”</p>
<p>Well, I’m glad you at least read that part. I’m not saying Greenspan was completely terrible; however, he definitely made some decision that, while good for America’s economy in the short and medium terms, will only serve to hurt it in the long run. Holding interest rates artificially low will have long-term negative effects stemming from the incentive that they give to consume instead of save. For example, according to one of the Mises.org articles cited below, “the gross national savings rate has fallen since 1987 from 16.5% to 13%, and the net national savings rate from 4.5% to 1%. (During the third quarter this year it fell below zero due to Katrina-related damages).” This means that housing and asset bubbles are pumped to the roof (which will see another inevitable correction, of course), while the desire for consumption feeds the trade deficit as the dollar is held in place only by a “Bretton Woods II” system of currency manipulation by Asian central banks. </p>
<p>Also, from the same Mises.org article, “From the stock market crash of 1987 to the S&L crisis of the early 1990s to the Asian crisis and the collapse of LTCM to the feared Y2K crisis to the bursting of the tech stock bubble, Greenspan has proven himself more than willing to bail out failed investors with additional doses of ‘liquidity’ (the popular inflationist euphemism for inflation).” This, according to the article, created a mentality of “bubble”-ization that led the investment psychology to think they could get bailed out on the brink of any disaster by the Fed. Now, I give this argument less credence than the other one, but I think it is still valid to a certain point. </p>
<p>Basically, the Fed’s various manipulations have led to the American economy and, thus, the world economy as a whole (though to a lesser degree) being out of balance, with not enough long-term savings and investment, property prices way too high, too much credit/indebtedness, and too much “easy money”, as was the policy throughout Greenspan’s term. I’ll end with a quote from The Economist: </p>
<p>Part of America’s current prosperity is based not on genuine gains in income, nor on high productivity growth, but on borrowing from the future. The words of Ludwig von Mises, an Austrian economist of the early 20th century, nicely sum up the illusion: It may sometimes be expedient for a man to heat the stove with his furniture. But he should not delude himself by believing that he has discovered a wonderful new method of heating his premises.</p>
<p>Also, please in the future give facts, or a least an opinion-based argument of some substance, instead of just saying “he is the man”.</p>
<p>Oh yeah, Greenspan fans often cite is record as an ardent inflation fighter. In fact, “The drop in America’s core rate of inflation has in fact been no greater than the average for all the industrialised countries in the Organisation for Economic Co-operation and Development (OECD).” Volcker was the true “pioneer” in this area anyway.</p>
<p><a href=“Monetary myopia”>Monetary myopia;
<a href=“Danger time for America”>Danger time for America;
<a href=“http://stefanmikarlsson.blogspot.com/2006/01/economist-echoes-my-indictment-of.html[/url]”>http://stefanmikarlsson.blogspot.com/2006/01/economist-echoes-my-indictment-of.html</a>
<a href=“http://www.mises.org/story/1985[/url]”>http://www.mises.org/story/1985</a>
<a href=“http://blog.mises.org/archives/004562.asp[/url]”>http://blog.mises.org/archives/004562.asp</a></p>