ARE WE STILL SUPPOSED TO CARE WHAT GREENSPAN THINKS?…. The last we heard from former Fed Chairman Alan Greenspan, he was acknowledging how spectacularly wrong he was about regulation of the financial industry, a mistake that nearly collapsed the global economy.
Apparently still working under the assumption that we should care what he thinks, Greenspan has weighed in on economic policy once more, with a fairly long document (pdf) condemning the Obama administration. “The current government activism is hampering what should be a broad- based robust economic recovery, driven in significant part by the positive wealth effect of a buoyant U.S. and global stock market,” Greenspan writes.
After noting in passing Greenspan’s “weak reasoning” and “shoddy econometrics,” Paul Krugman offers a timely reminder why the former Fed chairman just isn’t to be taken seriously.
Greenspan writes in characteristic form: other people may have their models, but he’s the wise oracle who knows the deep mysteries of human behavior, who can discern patterns based on his ineffable knowledge of economic psychology and history.
Sorry, but he doesn’t get to do that anymore. 2011 is not 2006. Greenspan is an ex-Maestro; his reputation is pushing up the daisies, it’s gone to meet its maker, it’s joined the choir invisible.
He’s no longer the Man Who Knows; he’s the man who presided over an economy careening to the worst economic crisis since the Great Depression — and who saw no evil, heard no evil, refused to do anything about subprime, insisted that derivatives made the financial system more stable, denied not only that there was a national housing bubble but that such a bubble was even possible.
(If that middle paragraph didn’t connect with you, it’s time to familiarize yourself with the Dead Parrot sketch.)
For a more detailed takedown of Greenspan’s piece, Brad DeLong very patiently noted Greenspan’s errors of fact and logic, but in the larger context, it’s really the chutzpah that gets to me.
Greenspan played a rather direct role in creating the calamity that the Obama administration was tasked with fixing, and to a real extent, the president and his team have succeeded, at least to the extent the economy is back on its feet, showing signs of slow growth where there was none.
Greenspan should hope that the world simply ignores him, and chooses to forgive his role in a spectacular and historic failure. For him to pipe up now, whining about “activism” causing “uncertainty” and holding back the economy is truly ridiculous, and borders on delusional.