…and we continue to talk ourselves off the edge of the cliff. For the second week in a row Meet The Press trotted out the most financially incompetent of the financially incompetent and placed them on their undeserving pedestal. Last week it was Tim Geithner, the veritable fox in the hen house of the financial crisis. This week it was Alan Greenspan, one of the grand orchestrator’s of our financial industry’s deregulation and the most vocal advocate of the virus that is neoliberalism. This man has poisoned our economy for almost 5 decades (and he has admitted that his models were “flawed”) yet we continue to worship at the altar of Greenspan….It’s worse than the John Meriwether’s of the world who continually reopen hedge funds after driving the last one into the ground. What in the world is wrong with Wall Street and our financial system? Are we really so incompetent as a whole that we find it is okay to consistently reward and rely on those who have consistently failed us? Pardon my frustration, but this is beyond madness. Why do these people command such obedience?
This week, Mr. Greenspan was once again out discussing monetary policy despite the fact that he has already admitted his models were flawed. 20 years of mistakes and yet we still hang on his every word. Mr. Greenspan is still latching onto this insane idea that bond yields are going to spike as soon as the bond vigilantes awake from their slumber:
MR. GREENSPAN: Well, the problem there implies that the government has control over those rates, meaning the Federal Reserve and the Treasury Department, in a sense. There is no doubt that the federal funds rate, that is the rate produced by the Federal Reserve, can be fixed at whatever the Fed wants it to be, but which the government has no control over is long-term interest rates, and long-term interest rates are what make the economy move. And if this budget problem eventually merges to the point where it begins to become very toxic, it will be reflected in rising long-term interest rates, rising mortgage rates, lower housing. At the moment, there is no sign of that, basically because the financial system is broke and you cannot have inflation if financial system is not working.
First of all, as the issuer of bonds denominated in their own currency, the US government can offer interest bearing debt instruments at whatever maturity and interest rate it pleases. As I’ve explained before, the bond market serves no fiscal purpose – it funds nothing. It is purely a monetary tool for the Fed to drain reserves and maintain control of interest rates. This actually renders the issuance of long-term bonds fairly meaningless. The reserve drain could be done with a CD, however, the government chooses to issue longer dated notes as well as short duration notes. If the government wanted to stop issuing 10 year notes they easily could (they did so with the 30 year and nothing happened to the bond market). Mr. Greenspan clearly thinks the bond market funds our spending and that this raises a solvency issue in the USA. His model is “”flawed” (not my words!).
He continued the interview by discussing the need for fiscal prudence and the expiration of the Bush tax cuts (an effective tax hike):
MR. GREENSPAN: Look, I’m very much in favor of tax cuts, but not with borrowed money. And the problem that we’ve gotten into in recent years is spending programs with borrowed money, tax cuts with borrowed money, and at the end of the day, that proves disastrous. And my view is I don’t think we can play subtle policy here on it.
This is more madness from a man who has been terribly wrong about everything for the majority of his career. The bond market is not “borrowed money”. Will China really stop buying our bonds? Will Japan stop buying our bonds? And if they do, who cares? It’s their loss. They can leave pieces of paper with old dead white men on them sitting in their bank vaults earning 0%. The Fed will continue to find buyers of government bonds in the USA (because the reserves created via government spending are ALWAYS there to be drained because the government effectively put them there!).
How many more times does Mr. Greenspan have to be wrong before we stop listening to this fear mongering? Mr. Greenspan wants to raise taxes and cut the deficit because he incorrectly believes the bond vigilantes are taking a nap. I am all for fiscal prudence (via efficient and effective government spending), but tax hikes serve very little purpose in this time of private sector de-leveraging. It will only exacerbate our debt problems at the private sector level and certainly will not make us more solvent at the government level. Greenspan has the gold standard on his mind and it has resulted in a massively flawed model for most of his career. The gold standard is dead, it is not coming back and we need to stop allowing these archaic thought processes to influence government policy.
The content on this site is provided as general information only and should not be taken as investment advice. All site content shall not be construed as a recommendation to buy or sell any security or financial product, or to participate in any particular trading or investment strategy. The ideas expressed on this site are solely the opinions of the author(s) and do not necessarily represent the opinions of firms affiliated with the author(s). The author(s) may or may not have a position in any security referenced herein. Any action that you take as a result of information or analysis on this site is ultimately your responsibility. Consult your investment adviser before making any investment decisions.
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“The gold standard is dead, it is not coming back and we need to stop allowing these archaic thought processes to influence government policy.”
What did you think of Stockman’s little gem over the weekend?
Nice one, TPC. I also wondered at this:
There is no doubt that the federal funds rate, that is the rate produced by the Federal Reserve, can be fixed at whatever the Fed wants it to be, but which the government has no control over is long-term interest rates, and long-term interest rates are what make the economy move. Alan Greenspan
It is absurd that anyone should lend money to the US government when the US Treasury could simply spend United States Notes into existence. It is also obscene in the sense that a loan to the US government is a tax on future generations. Furthermore, if the loan is directly or indirectly financed by the Fed then it is not a loan of existing money but a creation of new money. The purchasing power for that loan is thus stolen from the present, not borrowed from the future.
TPC,
He knows you’re right. I think the question goes to the motivation for the imprecise language. It’s probably easier to say “i can’t support tax cuts funded with borrowed money” than it is to explain why it’s a bad idea to print money to fund the budget. I’m all for Obama using this language if that’s what it takes to let the tax cuts for the wealthiest expire.
You'r are right TPC “How many more times does Mr. Greenspan have to be wrong before we stop listening to this fear mongering?” I don't recall anyone arguing with Mr. Greenspan. When he talks every on is suddenly silent. Henry Kissinger as the same kind of immunization from any objections. Right or wrong they talk as if they are the sacred voice of truth. I did listen to this interview including Mr. Greenspan and I could not believe what he was saying. He mentions some thing to the effect that assets had fallen buy some 36 trillions and that if they would move up it would create a lot of wealth. Does he still believe that levitation makes all people rich? Is this not what he was also saying in his book "The age of turbulence "that the increase in the prices of home made all people richer? Mr. Bubble and is team have saved the banks several times since 1987 by taking rates down below market rates so that higher spreads will benefit the banks and not be passed on to benefits to there clients. The fed does this and that is there idea of recapitalization. Fixing the problems is not in there agenda they prefer transferring the income from savers for the benefit of the banks. The result is that Banks do recapitalize and savers lose there interest and obviously lower there spending. Artificial rates are nothing else than a disguised form of subsidy in favors of the mismanage Investment Banks and at the expense of the general saving public. We are witnessing a massive transfer of wealth from responsible people that did paid interest for several years to pay there mortgage and saved money for retirement and are now are getting no return on those saving because the fed plays God with the rates. This is disgraceful. I wonder why the media still interviews and listen to those architects of financial desaster and failures. Rand once asked a mutual acquaintance “Do you think Alan might basically be a social climber?” Mr. Greenspan mentioned in is book that “the US tried price controls (under Nixon) but learned that they don't work and learned not to do them.” He was referring to a conversation during the period when he was head of the Fed and “controlling” US interest rates. How can Greenspan not know that something simply did not add up between what he claims to believe and what he did ?
I wonder if Greenspan has a blog where he berates TPC for his death knell to the euro call about 2 months ago.
If you find his blog make sure he does some fact checking. On June 7th I said:
“Well, I don't really do price targets, but I've pegged the EUR at $1.165 or so. The market could also find some support near the -20% level which is about the 1,000 level.”
I’ve consistently said the euro should die, but will be saved by egomaniacal politicians…
ETC it will die this is simply a remition stage. Do not underestimate the capacity of egomaniacal politicians at ruining countries
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© 2009 pragcap.com · Login.
…and we continue to talk ourselves off the edge of the cliff. For the second week in a row Meet The Press trotted out the most financially incompetent of the financially incompetent and placed them on their undeserving pedestal. Last week it was Tim Geithner, the veritable fox in the hen house of the financial crisis. This week it was Alan Greenspan, one of the grand orchestrator’s of our financial industry’s deregulation and the most vocal advocate of the virus that is neoliberalism. This man has poisoned our economy for almost 5 decades (and he has admitted that his models were “flawed”) yet we continue to worship at the altar of Greenspan….It’s worse than the John Meriwether’s of the world who continually reopen hedge funds after driving the last one into the ground. What in the world is wrong with Wall Street and our financial system? Are we really so incompetent as a whole that we find it is okay to consistently reward and rely on those who have consistently failed us? Pardon my frustration, but this is beyond madness. Why do these people command such obedience?
This week, Mr. Greenspan was once again out discussing monetary policy despite the fact that he has already admitted his models were flawed. 20 years of mistakes and yet we still hang on his every word. Mr. Greenspan is still latching onto this insane idea that bond yields are going to spike as soon as the bond vigilantes awake from their slumber:
MR. GREENSPAN: Well, the problem there implies that the government has control over those rates, meaning the Federal Reserve and the Treasury Department, in a sense. There is no doubt that the federal funds rate, that is the rate produced by the Federal Reserve, can be fixed at whatever the Fed wants it to be, but which the government has no control over is long-term interest rates, and long-term interest rates are what make the economy move. And if this budget problem eventually merges to the point where it begins to become very toxic, it will be reflected in rising long-term interest rates, rising mortgage rates, lower housing. At the moment, there is no sign of that, basically because the financial system is broke and you cannot have inflation if financial system is not working.
First of all, as the issuer of bonds denominated in their own currency, the US government can offer interest bearing debt instruments at whatever maturity and interest rate it pleases. As I’ve explained before, the bond market serves no fiscal purpose – it funds nothing. It is purely a monetary tool for the Fed to drain reserves and maintain control of interest rates. This actually renders the issuance of long-term bonds fairly meaningless. The reserve drain could be done with a CD, however, the government chooses to issue longer dated notes as well as short duration notes. If the government wanted to stop issuing 10 year notes they easily could (they did so with the 30 year and nothing happened to the bond market). Mr. Greenspan clearly thinks the bond market funds our spending and that this raises a solvency issue in the USA. His model is “”flawed” (not my words!).
He continued the interview by discussing the need for fiscal prudence and the expiration of the Bush tax cuts (an effective tax hike):
MR. GREENSPAN: Look, I’m very much in favor of tax cuts, but not with borrowed money. And the problem that we’ve gotten into in recent years is spending programs with borrowed money, tax cuts with borrowed money, and at the end of the day, that proves disastrous. And my view is I don’t think we can play subtle policy here on it.
This is more madness from a man who has been terribly wrong about everything for the majority of his career. The bond market is not “borrowed money”. Will China really stop buying our bonds? Will Japan stop buying our bonds? And if they do, who cares? It’s their loss. They can leave pieces of paper with old dead white men on them sitting in their bank vaults earning 0%. The Fed will continue to find buyers of government bonds in the USA (because the reserves created via government spending are ALWAYS there to be drained because the government effectively put them there!).
How many more times does Mr. Greenspan have to be wrong before we stop listening to this fear mongering? Mr. Greenspan wants to raise taxes and cut the deficit because he incorrectly believes the bond vigilantes are taking a nap. I am all for fiscal prudence (via efficient and effective government spending), but tax hikes serve very little purpose in this time of private sector de-leveraging. It will only exacerbate our debt problems at the private sector level and certainly will not make us more solvent at the government level. Greenspan has the gold standard on his mind and it has resulted in a massively flawed model for most of his career. The gold standard is dead, it is not coming back and we need to stop allowing these archaic thought processes to influence government policy.
The content on this site is provided as general information only and should not be taken as investment advice. All site content shall not be construed as a recommendation to buy or sell any security or financial product, or to participate in any particular trading or investment strategy. The ideas expressed on this site are solely the opinions of the author(s) and do not necessarily represent the opinions of firms affiliated with the author(s). The author(s) may or may not have a position in any security referenced herein. Any action that you take as a result of information or analysis on this site is ultimately your responsibility. Consult your investment adviser before making any investment decisions.
Post Footer automatically generated by Add Post Footer Plugin for wordpress.
“The gold standard is dead, it is not coming back and we need to stop allowing these archaic thought processes to influence government policy.”
What did you think of Stockman’s little gem over the weekend?
Nice one, TPC. I also wondered at this:
There is no doubt that the federal funds rate, that is the rate produced by the Federal Reserve, can be fixed at whatever the Fed wants it to be, but which the government has no control over is long-term interest rates, and long-term interest rates are what make the economy move. Alan Greenspan
It is absurd that anyone should lend money to the US government when the US Treasury could simply spend United States Notes into existence. It is also obscene in the sense that a loan to the US government is a tax on future generations. Furthermore, if the loan is directly or indirectly financed by the Fed then it is not a loan of existing money but a creation of new money. The purchasing power for that loan is thus stolen from the present, not borrowed from the future.
TPC,
He knows you’re right. I think the question goes to the motivation for the imprecise language. It’s probably easier to say “i can’t support tax cuts funded with borrowed money” than it is to explain why it’s a bad idea to print money to fund the budget. I’m all for Obama using this language if that’s what it takes to let the tax cuts for the wealthiest expire.
You'r are right TPC “How many more times does Mr. Greenspan have to be wrong before we stop listening to this fear mongering?” I don't recall anyone arguing with Mr. Greenspan. When he talks every on is suddenly silent. Henry Kissinger as the same kind of immunization from any objections. Right or wrong they talk as if they are the sacred voice of truth. I did listen to this interview including Mr. Greenspan and I could not believe what he was saying. He mentions some thing to the effect that assets had fallen buy some 36 trillions and that if they would move up it would create a lot of wealth. Does he still believe that levitation makes all people rich? Is this not what he was also saying in his book "The age of turbulence "that the increase in the prices of home made all people richer? Mr. Bubble and is team have saved the banks several times since 1987 by taking rates down below market rates so that higher spreads will benefit the banks and not be passed on to benefits to there clients. The fed does this and that is there idea of recapitalization. Fixing the problems is not in there agenda they prefer transferring the income from savers for the benefit of the banks. The result is that Banks do recapitalize and savers lose there interest and obviously lower there spending. Artificial rates are nothing else than a disguised form of subsidy in favors of the mismanage Investment Banks and at the expense of the general saving public. We are witnessing a massive transfer of wealth from responsible people that did paid interest for several years to pay there mortgage and saved money for retirement and are now are getting no return on those saving because the fed plays God with the rates. This is disgraceful. I wonder why the media still interviews and listen to those architects of financial desaster and failures. Rand once asked a mutual acquaintance “Do you think Alan might basically be a social climber?” Mr. Greenspan mentioned in is book that “the US tried price controls (under Nixon) but learned that they don't work and learned not to do them.” He was referring to a conversation during the period when he was head of the Fed and “controlling” US interest rates. How can Greenspan not know that something simply did not add up between what he claims to believe and what he did ?
I wonder if Greenspan has a blog where he berates TPC for his death knell to the euro call about 2 months ago.
If you find his blog make sure he does some fact checking. On June 7th I said:
“Well, I don't really do price targets, but I've pegged the EUR at $1.165 or so. The market could also find some support near the -20% level which is about the 1,000 level.”
I’ve consistently said the euro should die, but will be saved by egomaniacal politicians…
ETC it will die this is simply a remition stage. Do not underestimate the capacity of egomaniacal politicians at ruining countries
Notify me of follow-up comments via e-mail
© 2009 pragcap.com · Login.
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