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1. “…Mr. Greenspan was the undisputed governor, architect – the promulgator of what will be recognized as an epic failure in central banking. After all, he was for about 18 years the appointed guardian over a financial system that perpetrated the greatest Credit and speculative excess in history. He dominated monetary policy like no other central banker in history. Chairman Greenspan not only negligently failed to act to reign in dangerous excesses, he became a vocal proponent for virtually all aspects of “Wall Street finance.”
Anyone that has read history related to central banking appreciates that Alan Greenspan conveniently made up new rules as he went along. He evolved into the absolute “maestro” at concocting sophisticated rationale for seemingly every troubling development that took root in contemporary (“wildcat”) finance. Greenspan was an outspoken proponent of securities-based finance; of models-based risk management; of the great benefits provided by derivatives markets; of the liquidity benefits of leveraged speculation; of asymetrical “telegraphed baby-step” monetary management accept when Wall Street demanded big and rapid cuts; and a proponent of “risk management”-based monetary management (i.e. ease aggressively to forestall even a low probability of “deflation”). He trumpeted the profound benefits emanating from the capacity for contemporary finance to better quantify, manage and disburse risk – in the process creating a more stable financial sector. Most importantly, he championed the notion that it was preferable for the system to let Credit booms and asset Bubbles run their course - and then to treat their busts aggressively with monetary stimulus to ensure little negative impact the real economy. He claimed Bubbles were only recognizable after the fact.
He evolved into the ultimate activist and micromanaging central banker, wrapped bizarrely in the cloth of a free market ideologue. It was a most precarious amalgamation. On his watch transpired historic ballooning of the government-sponsored enterprises, of Wall Street balance sheets, and of the size, power and influence of the leveraged speculating community. Worse yet, it’s my view that he used these sectors as key inflationary mechanisms. The Greenspan Episode will be seen from a historical perspective as central banking lunacy. It was the exact intoxicant for market participants and politicians to wallow in during a spectacular Credit-induced boom.”
http://www.prudentbear.com/index.php...leBulletinHome
p.s.
Commentary is located in the very last section, entitled, “The Greenspan Episode.”
Anyone that has read history related to central banking appreciates that Alan Greenspan conveniently made up new rules as he went along. He evolved into the absolute “maestro” at concocting sophisticated rationale for seemingly every troubling development that took root in contemporary (“wildcat”) finance. Greenspan was an outspoken proponent of securities-based finance; of models-based risk management; of the great benefits provided by derivatives markets; of the liquidity benefits of leveraged speculation; of asymetrical “telegraphed baby-step” monetary management accept when Wall Street demanded big and rapid cuts; and a proponent of “risk management”-based monetary management (i.e. ease aggressively to forestall even a low probability of “deflation”). He trumpeted the profound benefits emanating from the capacity for contemporary finance to better quantify, manage and disburse risk – in the process creating a more stable financial sector. Most importantly, he championed the notion that it was preferable for the system to let Credit booms and asset Bubbles run their course - and then to treat their busts aggressively with monetary stimulus to ensure little negative impact the real economy. He claimed Bubbles were only recognizable after the fact.
He evolved into the ultimate activist and micromanaging central banker, wrapped bizarrely in the cloth of a free market ideologue. It was a most precarious amalgamation. On his watch transpired historic ballooning of the government-sponsored enterprises, of Wall Street balance sheets, and of the size, power and influence of the leveraged speculating community. Worse yet, it’s my view that he used these sectors as key inflationary mechanisms. The Greenspan Episode will be seen from a historical perspective as central banking lunacy. It was the exact intoxicant for market participants and politicians to wallow in during a spectacular Credit-induced boom.”
http://www.prudentbear.com/index.php...leBulletinHome
p.s.
Commentary is located in the very last section, entitled, “The Greenspan Episode.”
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