In this video interview, Greenspan issues a challenge to anyone who can prove he was wrong.
http://www.marketwatch.com/video/asset/greenspan-prove-i-was-wrong/881A4154-8710-4BCB-952B-219E94F704FB#!881A4154-8710-4BCB-952B-219E94F704FB
Has anyone done that yet?
BTW, I briefly checked M2 growth in 2003, and he was right that growth was falling rapidly.
Back in 2003, I said that Google would still be around today as long as I kept driving my car to and from work. Lo and behold, I still drive to work every day, and Google is still around. I challenge anyone to tell me I was wrong.
Yes, Alan Greenspan skimmed the op-ed in yesterday's Times written by Michael Burry, in which Burry says that the former Fed chairman's blindness to the housing bubble was caused by his dismissive attitude toward opinions coming from outside his inner circle, Greenspan told ABC News. But look, this guy — what's his name again? Burry? Greenspan isn't sure, he read the op-ed "very quickly" — is very likely just one of a "very, very small group" of people who "purely by luck" managed to guess the direction of the economy. Might he be smarter than that? Maybe, but Greenspan doubts it. If Burry had been someone worth paying attention to at the time, Greenspan would have known about him. There are only three or four people in the world who were really smart enough to see the crisis coming properly, and Greenspan is friends with all of them. No, there are not six or seven. Greenspan doesn't know about this guy Peter Schiff, either, who is all, like, "Alan Greenspan is full of it." Sure, he wrote in his little book and said on television multiple times that the housing market was going to collapse. But how was Greenspan supposed to know about that? It wasn't like Schiff mattered back then. It would be like if you worked at the SEC, and you started getting letters from a guy saying, "the world's largest hedge fund is a fraud." Would you believe him? Of course not. If everyone listened to the opinions of random people who seem to know what they're talking about, where would we be? Oh, wait, don't answer that.
Well, I wrote a whole book in 2004 called Maestro, My Ass! but my employer at the time blocked its publication. I finally published it in 2009. You can get it at Amazon or Barnes & Noble or order it directly from me here: https://mikeashton.wordpress.com/order-maestro-my-ass/
I think it qualifies as challenging Greenspan.
Michael Ashton: Well, I wrote a whole book in 2004 called Maestro, My Ass! but my employer at the time blocked its publication. I finally published it in 2009. You can get it at Amazon or Barnes & Noble or order it directly from me here: https://mikeashton.wordpress.com/order-maestro-my-ass/ I think it qualifies as challenging Greenspan.
So does your book address Greenspan's claim that the US economy was facing deflation in 2003? And that there was a savings glut in Asia causing an imbalance in capital flows? Or that the success of the Federal Reserve after the '87 crash and the dot com crash led to a pschology that "nothing bad can happen" and therefore caused irrational exuberance? And that the wealth effect is real, that an increase in asset prices is best way to stimulate the economy because it does not involve debt?
From the Afterword:
Economic actors, in short, evolve their responses based on the environment. And, under Greenspan, it was clear that the environment was designed to always be sunny, safe, and warm. There was scant need for a margin of safety when nothing bad had ever happened and was never permitted to happen. Economic actors relaxed, because it was in their interest to do so. Why evolve a hardened shell, with all of the energy that requires, if you never need a hardened shell?
The main theme of the book is that the Fed as an entity faces numerous decisions where the reward for making a correct call is small and defined, but the penalty for being wrong is large and undefined; therefore, the body should work hard to write as few of these "policy options" as possible, not as many as possible.
And it should work hard NOT to make the environment super-safe. I think the worst single thing Greenspan did was to start making post-meeting statements and releasing minutes. Making sure we all knew what the Fed was thinking and doing removed one set of risks from those people who would otherwise run less leverage.