Alarming News: I like Morgan Freeberg. A lot.
American Digest: And I like this from "The Blog That Nobody Reads", because it is -- mostly -- about me. What can I say? I'm on an ego trip today. It won't last.
Anti-Idiotarian Rottweiler: We were following a trackback and thinking "hmmm... this is a bloody excellent post!", and then we realized that it was just part III of, well, three...Damn. I wish I'd written those.
Anti-Idiotarian Rottweiler: ...I just remembered that I found a new blog a short while ago, House of Eratosthenes, that I really like. I like his common sense approach and his curiosity when it comes to why people believe what they believe rather than just what they believe.
Brutally Honest: Morgan Freeberg is brilliant.
Dr. Melissa Clouthier: Morgan Freeberg at House of Eratosthenes (pftthats a mouthful) honors big boned women in skimpy clothing. The picture there is priceless--keep scrolling down.
Exile in Portales: Via Gerard: Morgan Freeberg, a guy with a lot to say. And he speaks The Truth...and it's fascinating stuff. Worth a read, or three. Or six.
Just Muttering: Two nice pieces at House of Eratosthenes, one about a perhaps unintended effect of the Enron mess, and one on the Gore-y environ-movie.
Mein Blogovault: Make "the Blog that No One Reads" one of your daily reads.
The Virginian: I know this post will offend some people, but the author makes some good points.
Poetic Justice: Cletus! Ah gots a laiv one fer yew...
She says his ignorance is rather shocking, and I’m going to have to go ahead and agree.
For years, Alan Greenspan was thought to be a genius, responsible for keeping inflation at bay and encouraging our booming economy. He fine-tuned interest rates to make sure all this was going smoothly, and to the best of my recollection he earned resounding praise from almost everyone.
Well, it turns out this emperor had no clothes after all. But when he finally realized something was fishy, somewhere around late 2005, he says there was nothing he could do about it:
“If we [had] tried to suppress the expansion of the subprime market, do you think that would have gone over very well with the Congress?” Mr. Greenspan said. “When it looked as though we were dealing with a major increase in home ownership, which is of unquestioned value to this society—would we have been able to do that? I doubt it.”
Funny thing, I happen to agree with him. That doesn’t mean he shouldn’t have tried, though. Nor does it excuse the rather shocking disclosure of the limits of his understanding of derivatives and the mortgage market and what it all meant.
One of the most interesting quotes from Greenspan is this:
We could have basically clamped down on the American economy, generated a 10 percent unemployment rate,” he said. “And I will guarantee we would not have had a housing boom, a stock market boom or indeed a particularly good economy either.”
In other words, we could have suffered then instead of suffering now. There is no free lunch; ever hear of it? I wonder if Greenspan has.
When a bubble is created, it must burst at some point, because bubbles are inherently fragile things. But just try telling it to Congress, then or now.
Here, let’s take some different excerpts from the story and then I’ll offer my thoughts:
Alan Greenspan, the former chairman of the Federal Reserve, told CNBC in a documentary to be shown Thursday night that he did not fully understand the scope of the subprime mortgage market until well into 2005 and could not make sense of the complex derivative products created out of mortgages.
“So everybody in retrospect now knows that that boom was developing under the markets for quite a period of time, but nobody knew it,” Mr. Greenspan told CNBC’s David Faber. “In 2004, there was just no credible information on that. It wasn’t until we got well into 2005 that the first inklings that that was developing was emerging,” he said.
:
The Fed’s “easy money” policy created an excess of cash that inflated equity and asset prices, leading to both the technology bubble of the late 1990s and the housing bubble in this decade.While Mr. Greenspan acknowledges that he could have done something to avert the housing crisis, he contends his hands were tied.
“If we tried to suppress the expansion of the subprime market, do you think that would have gone over very well with the Congress?” Mr. Greenspan said. “When it looked as though we were dealing with a major increase in home ownership, which is of unquestioned value to this society — would we have been able to do that? I doubt it.” [emphasis mine]
NN’s analogy about the Emperor and clothes just seems more and more apt, the more you find out about it, huh? Bubble this, bubble that…bubble, bubble, toil and trouble, fire burn and cauldron bubble.
It is the price we pay for fiat currency: The value of money is based on the emotional state of some construct, which in turn consists of millions of strangers who will never be personally met.
And so, since we went off the gold standard, and for many years before that, every single universal financial difficulty has been a direct result of a bubble bursting. What happens when a bubble bursts? An exuberant perception of an asset’s worth, is suddenly realigned with the more modest reality of it. It was true in the case of these homes, and the loans attached to them; it was true of the dot-coms, and the practical value of an hour of labor from the geeks who staffed them; it was true of the stocks, the bonds, the petroleum — everything. It’s all evaluated by the emotional state of strangers.
Which means we’ve Yang-ified money. That means, rejecting a more methodical arrival at reasoned inferences based on established facts, in favor of group-think. Nothing is carved in stone because it all depends on what the other fellow thinks. Greenie came out and admitted it word-for-word up there, didn’t he: “If we tried to suppress the expansion of the subprime market, do you think that would have gone over very well with the Congress?” This is why committees make bad decisions. Cause-and-effect takes a back seat to what-does-someone-else-think.
Our twenty-first century economy is one that is prone to bubbling up, because bubbling is what it is. Our money is bubbles, our investments are bubbles, our houses are bubbles. All our property is bubbles. We chose to make it that way — everything is valued according to the way it is perceived, and so this painful alignment of perception-with-reality has become a way of life. Crashy, crashy. Get used to it. We don’t have the proper mindset to confront unpleasantness early — we have rejected that option every time it has arisen — so we have to do our confronting late, when it’s more expensive for us to do it.
The mystery, though, is that I can figure it out and I’m just a guy in his underwear typing on a laptop, enjoying the benefits of a rather lackluster high school education.
This was a surprise to Greenspan?
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If I hear one more time, about easy money, when the Fed raise rates, eighteen consecutive times, you think that might have had something to do with popping the bubble.
- narciso | 02/15/2009 @ 11:42