Greenspan was a central planner

About Alan the Printer's comments that Arthur talks about --

Bottom line: He was a central planner. I'm little swayed by proclamations of the death of the free market by a central planner.

Someone I've known online for many years and whose views on the economy and investing I respect had the following reaction to Greenspan's comments:

It's funny, but probably not too surprising, that Greenspan is so eager to throw overboard what little he had in terms of credentials in support of the free market, by 'admitting' that even more regulation would perhaps have helped avert the calamity.

In a free market, the banks would indeed have acted more cautiously, and their self-interest to protect their shareholders equity would have been far more pronounced.

The root of the problem is not with this assumption turning out not to be true - the root of the problem is something else. The banks and broker dealers were subjected to the wrong incentives - by an agency that has nothing to do with the free market. The root of the problem is the monetary system itself - the one that Greenspan helmed - the fractionally reserved fiat money system, at the center of which we find a central economic planning agency - the Federal Reserve.

Greenspan's greatest error was to believe that modern day central banks had somehow managed to 'emulate a gold standard', as he once averred in a q&a with Congressman Ron Paul.

This is manifestly not the case, as the sheer unlimited credit creation during Greenspan's reign (inter alia) attests to.

It is of course obvious by dint of economic theory as well that letting a gaggle of bureaucrats fix interest rates can only lead to economic outcomes that are worse than those a free market set interest rate would lead to.

The bureaucrats manning the Federal Reserve are in exactly the same position that the Soviet GOSPLAN agency found itself in: they can not possibly know what the correct interest rate should be at a given point in time, just as GOSPLAN never knew how many tractors, how many chickens and how many shoes should be produced.

This is the problem Greenspan should have acknowledged, but that is of course 'impossible' for a former central bank chief, even though i personally suspect that he actually knows better.

Share this

Alan Greenspan = Weasle

I was already pissed at Alan Greenspan for his anti-free market actions over his entire term, but blaming free markets takes the cake. What a weasel.

Indeed