Murray Rothbard had Alan Greenspan’s number a long time ago. (Many thanks to our old friend Marc Faber for bringing this gem to our attention.)
“I knew Alan thirty years ago,” Rothbard wrote in 1987, when Greenspan was first appointed to head the Fed. “and have followed his career with great interest since…Greenspan’s real qualification is that he can be trusted never to rock the establishment’s boat…at no time in his twenty-year career in politics has he ever advocated anything that even remotely smacks of laissez-faire, or even any approach toward it… Alan is a long-time member of the famed Trilateral Commission, the Rockefeller-dominated pinnacle of the financial-political power elite in this country. And as he assumes his post as head of the Fed, he leaves his honored place on the board of directors of J.P. Morgan & Co. and Morgan Guaranty Trust.”
It was pointed out that Greenspan had been a devotee of Ayn Rand, who had the quirky presence of mind to die on Alan’s birthday. But Randism is not laissez-faire-ism. Randism is looking-out-for-number-one-ism…a creed Alan Greenspan never forgot.
We are annoyed at Alan Greenspan, not because he set the U.S. middle class on the path to destruction but because his book, The Age of Turbulence , got so much more attention than the book we wrote with Lila Rajiva, Mobs, Messiahs, and Markets . Mr. Greenspan’s empty tome came out right after ours…and promptly knocked ours out of its brief moment in the limelight.
But now others are getting annoyed at Mr. Greenspan too – for more serious reasons. Says Nobel Prize winning economist Joseph Stiglitz:
“Alan Greenspan really made a mess of all this. He pushed out too much liquidity at the wrong time. He supported the tax cut in 2001, which is the beginning of these problems [deficits didn’t matter to him, either]…He encouraged people tot take out variable rate mortgages.”
The critique we leveled against the Greenspan Fed three years ago is now widely accepted; the feds saw the little recession of ’01…and panicked. They put out too much money and too much credit for much too long, causing bubbles all over the world. So free and easy were American banks and credit institutions during this period that bank robbers stopped wearing ski masks and carrying guns; all they had to do was to ask for the money like everyone else.
The free-floating loot produced a holiday atmosphere that looked to most people like real prosperity. “See,” they said to each other, “the free market works.”
“Greed is good,” said Gordon Gekko. Financial incentives were thought to be the key to everything – higher productivity, higher profits, growth…everything. You want an executive to perform? Give him stock options! You want an investment manager to make you money? Give him a piece of the action. You want to win over the poor and minorities? Let them get in on this great money making machine. Remember all those columns by Thomas L. Friedman that we made fun of? Friedman keeps telling us that the terrorists would come over to our side if they just had more financial incentives…if they had jobs…if they had university degrees…if they had credit cards and mortgages. But it emerged in England that of the terrorist suspects nabbed so far, the average one was a doctor working for the National Health Service!
Money isn’t everything. Especially the kind of money that the Fed creates.
Markets and Money