Greenspan & Naomi Klein face off on Democracy Now

[disrupter]

Alan Greenspan vs. Naomi Klein on the Iraq War, Bush's Tax Cuts, Economic Populism, Crony Capitalism and More

In a Democracy Now! exclusive debate, former federal reserve chairman Alan Greenspan and journalist Naomi Klein square off on the Iraq war, oil, President Bush tax cuts, social security, economic populism in Latin America, corruption and crony capitalism. Greenspan headed the central bank in the United States for almost two decades. He has written a new 500-page memoir titled, "The Age of Turbulence: Adventures in a New World." At one point in the debate, Klein asks Greenspan, " The policies that you pursued -- deregulation, privatization, free trade -- have contributed to this extraordinary division of income that is really the fuel for this economic populism that you’re now denouncing. Aren't you the one that has caused this crisis of faith in capitalism?"http://www.democracynow.org/article.pl?sid=07/09/24/1412226

A good listen, an intelligent discussion.

[moonman]

Thankyou disrupter. I give Greenspan some credit for appearing. We need more of this type of discussion. Klein was fairly disrespectful and I think she could have made the same points without being so challenging. Greenspan comes off as a man of dignity and charm.

Ironic though, rather than fully answer for his own actions in setting monetary policy, he tended to be highly critical of what he couldn't control, which is fiscal policy.

A real criticism of Greenspan is that he failed to act as Paul Volcker might have done. When Greenspan saw the Bush Administration so irresponsible on the spending side, he should have raised interest rates much sooner. Instead, Greenspan wimped out and merely used the bully pulpit to preach fiscal responsibility during his many visits to Congress.

Too bad Klein doesn't have the parts to go there and instead argued points of law and moral authority.

Both Greensapn & Bernanke fight inflation with more inflation. Greenspan is the trickier of the two. Clinton did aid and abet in the deception. You might recall or have seen recently that we don't include energy & food in the inflation rate? We also subtract productivity increases from inflation before releasing the final inflation rate. Both treatments of inflation are phony as hell. Each is a Greenspan invention and Klein didn't touch on either.

I also found it interesting Greenspan's describing his differences with Bill Clinton amounting to about 20%. What evaporated the surplus was increased spending and tax cuts. Had Clinton been followed by an FDR type who would have used those surpluses to invest in rebuilding existing infrastructure and creating new infrastructure, i.e. alternative energy, Greenspan's fear of gubment owning much of the private wealth would be unfounded.

Still all in all, it's a great piece of brainfood for which I thankyou disrupter.

[moonman]

Bill Fleckenstein writing for msnmoney calls it pretty well. I still think he misses the point even though he addresses the USD.

Bernanke: The anti-Robin Hood
By slashing the federal funds rate, the Federal Reserve chief robbed from the country's future to give a gift to Wall Street. And a lot of ordinary Americans will end up getting hurt.

The Federal Bank of Guardian Angels roared down Wall Street last Tuesday. Its mission -- to bail out the stock market -- was a success (for now).

But the rate cut was no gift to Main Street, which lies outside the loop of crony capitalism.

Bobble-head Fed
Long ago, the Fed abdicated its responsibility under then-Chairman Alan Greenspan. But now chief Ben Bernanke and the boys at the Fed have taken irresponsibility to a new level, where they have clearly demonstrated that they work for Wall Street -- and when Wall Street says jump, the Fed asks, how high?

I don't quite have the database to research this, but I seriously doubt that we've ever experienced a 10% fed funds rate cut, or discount rate cuts of better than 15%, with the stock market a few percentage points off an all-time high.

And at this rate -- no pun intended -- we could see another record high in almost no time. I suspect that's never happened before, either, demonstrating that no real pain had been taken prior to the bailout.

Yet the Fed's board members felt the need -- when they knew they were being closely watched and knew they would be telegraphing a message -- to telegraph the following message: We don't care what happens to the dollar or, by extension, the Treasury market. We care only about Wall Street.

A rate cut to be rued
Now the dollar will sink, and inflation will almost certainly rise. And though the Fed was able to drive overnight rates lower by 50 basis points, the most important development in the wake of its action was the decrease in the price of longer-term Treasurys, as rates out 10 years and longer rose over 25 basis points over the next three days.

So while the Fed, in its role of bartender of last resort, can lower short-term interest rates, over time I believe that long rates will rise, as foreigners (and Americans) digest what last week's Fed action means. Folks will recognize that inflation is not measured excluding food and energy, and will realize that inflation in this country is 5%-plus -- which would argue for long-term rates in the neighborhood of 7% or 8%. Thus it has been left up to the currency and Treasury markets to discipline the Fed, which always takes longer and is always far more painful.

Obviously, another consequence is that the moral hazard has been raised yet again. It didn't take long for someone who probably should have gone out of business for acting irresponsibly to start whining about wanting some more help at the bailout trough. That would be Countrywide Financial (CFC, news, msgs) CEO Angelo Mozilo, who last Wednesday suggested that Fannie Mae (FNM, news, msgs) ought to be allowed to buy mortgages of up to $850,000.

Maybe he'll get his way, as just that day the Office of Federal Housing Enterprise Oversight reversed itself regarding future growth rates of government-sponsored entities. It's hard to say exactly what will be possible until some form of financial discipline is brought to bear in this country.

Innocent victims of drive-by central banking
Though it's obvious the stock market benefited from the Fed's action, it might not be quite so clear who will get hurt. Obviously, those on fixed incomes, like retirees, will be hurt. Children will be hurt, because they're the ones who will have to pay for the incredible mess that will have to be sorted out at some point. And anyone old-fashioned enough to save money will be hurt.

Of course, those who will benefit (for now), in addition to the extremely wealthy, are speculators. It seems the national pastime in this country is to speculate and lever up. And then, when one and two plans don't work, demand to be bailed out. And by the way, your demands will be met.

Cut from the Greenspan cloth
To sum up: Given the fact that folks were going to be scrutinizing what the Fed did, and what message that would send about what the Fed intends to do at future meetings, last week's 50-basis-point rate cut has to rank up there with the two most irresponsible moves pulled by Greenspan. Those were when:

In October 1998, on an option-expiration Friday, Greenspan cut rates -- with about an hour of trading to go.

In January 2001, he sprang a surprise 50-basis-point rate cut.

The stock market cheered when the Fed cut interest rates. But watch your wallet, warns MSN Money's Jim Jubak. While stocks rose, the dollar fell. Expect higher prices for oil, gasoline and anything imported from Europe, Canada or China.

The supposedly clairvoyant crowd at the Fed never sees problems coming, but folks always assume that it will be able to save them via the printing press. Though that's worked for a long time, in the end it's going to lead to huge problems for this country, as anyone with an ounce of brains understands.

I don't think the Fed's punch-bowl fill-up will be able to ward off recession or restart the housing bubble. All the Fed will have accomplished is to postpone some of the fallout from our current problems while making them even worse in the long run.

My comment: Naomi Klein had Democracy Now serve Greenspan for dinner and she failed to take even one bite out of him. She failed to even so much as stick a fork in him. Naomi Klein is a lightweight.

[disrupter]

Mostly the fed rate adjustment either goose the economy at the expense of the dollar or visa-versa.

I give credit to Paul Volker who reigned in inflation & had the cajones to listen to the businessmen he was hurting in the process.

Greenspan is intelligent enough to know he captained during calm seas.
He got a somewhat rude enlightenment when the fed tightened short term rates in the US, without even budging long-term rates because global forces were working beyond his contol.
He had a rational explanation for everything he did, even if one might not agree with him about them all.
He had the nerve to come onto a show that he had to at least guess would be less than cajoling. How refreshing, a man who had confidence in himself & his actions to not just show up to self-congradulating audiences like Bush requires. He is aging but he is still thinking.

I think it is refreshing to see journalists who think digging for the truth is more important than phony accommodation & patronization of guests. Real journalism instead of content-less corporate promo & gloss.

Of course the reason Bush never bothered him about interest rates is because due to conditions he was able to prudently put them at record low levels.

Interestingly the dialogue brings up the point that corruption is a problem under any economic system, centrally planned, free market or anything else.

I draw from that we need to find some other way of addressing & eliminating most corruption.
I guess the point missed is that when people treat capitalism as having any other virtue beyond single minded efficiency, many people take that as a cover for lying cheating & stealing.
Capitalism is almost devoid of other virtues & when it claims more it becomes even less virtuous by its hypocrisy.
Intelligent people know you have to keep plenty of honest bean counters around to track capitalism & probably anything else.

We should raise honest bookkeepers to one of the highest, most honored & important positions around. Clean, healthy capitalism, politics, science & technology are all dependent on them.

Religion on the other hand is the anti-bookkeeping endeavor.

I believe most religions burn bookkeepers as heretics, don't they?