Former Fed Chairman Alan Greenspan has probably come as close as he ever will to accepting some culpability for the unfolding economic meltdown. Under harsh questioning in Congress, he announced that he had uncovered a "flaw" in the economic philosophy that had stood him in such good stead for the past forty years.
In the usual Greenspan way, it's a bit difficult to figure out just what he thinks the "flaw" is. However, it seems to be something to do with overestimating the ability of bank shareholders to act in their own self-interest. That's right -- his only mistake was in misjudging the stupidity of others. He's certainly not admitting that it might just possibly have been a mistake for the Fed to cut interest rates every time the markets even quivered. Nor would it occur to him that the behaviour of bank shareholders that he now deplores might in any way have been influenced by the irresponsible monetary policy pursued by the Fed.
Everyone's jumping on the "bash the maestro" bandwagon now, so much so that those of us who've been on it for years are starting to find it a bit claustrophobic. When Greenspan was awarded his honorary KBE by the Queen a few years ago, I wrote in my Bloomberg message header that it must stand for "King of the Bubble Economy". Hey Al, can we have our gong back, please?
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