Is it Greenspan's Fault?

Greenspan's book has been released, and it just so happens the recession that he helped create is occuring at the same time. I've been reading a lot of complaints about the many mistakes that Greenspan made as Fed Chairman. But how much blame does he really deserve? Is it all Greenspan's fault?

I would answer the question in the following way:

Instead of blaming one individual, perhaps we should look at the institution itself. If we blame one individual's decisions, then we end up talking in circles about "mismanagement." But a more important question is: "Should the economy be managed at all?" and "Is that even possible?"

History says no...as does the Austrian Business Cycle Theory.

As far as bad decisions that Greenspan made......I think the mistake (of any Fed Chairman) begins at the moment the Fed fixes interest rates, and the market rate is abandoned. That is when the crisis begins. Even though we call the return to reality a "crisis," the real crisis is when the price fixing and malinvestment (i.e., boom) occurs. I think everything else is just talk. If the market set interest rates, it would be impossible to have conversations about "mismanagement," and who has a better "plan."

I think Ron Paul has set an excellent example on how to think about these matters. You never hear Dr. Paul blaming specific individuals at the Fed. In fact, if I recall correctly, he's said several times that we can't place all of the blame at Bernanke's feet. Dr. Paul has pointed out that the mess we are in is an accumulation of trying to centrally plan an economy. I've never heard Dr. Paul blame a specific Fed Chairman by name. Instead he challenges the institution itself.