Was Greenspan Right?

[MichaelB]

He made his irrational exuberance comment on 12/5/96, and that day the S&P closed at 744. Today, 12 years later, the S&P closed below that number at 735.

Is he now going to say "I was right, just a bit early"?

Sigh.

 

[DblDoc]

No he was right then. Unfortunately he did not act on it. When everyone is partying it is hard to be the one turning off the music...

DD

 

[ziggy29]

As he was warning about irrational exuberance, the actions he'd take for the next decade with monetary policy encouraged it.

 

[kumquat]

My hat is wearing thin. Anybody know a super cheap source of tinfoil?

 

[HFWR]

I hope no one is holding their breath waiting for someone to stand up and say "It was my fault"...

 

[audreyh1]

As he was warning about irrational exuberance, the actions he'd take for the next decade with monetary policy encouraged it.

Ditto! Absolutely right on!

Audrey

 

[DblDoc]

I hope no one is holding their breath waiting for someone to stand up and say "It was my fault"...

Greenspan did admit in testimony to Congress that he was wrong to assume that the markets would police themselves.

There are so many mea culpas. From the consumer taking out a loan they realistically could not afford, the banks and brokers that made the loans possible, the financial corporations that repackaged and sold them, the rating agencies/insurance companies that stamped them AAA and finally the regulatory arms of gov't that failed to police them all.

DD

 

[riskadverse]

Being right and not acting upon it is being wrong.

 

[HFWR]

After admitting he was wrong thinking the markets would self-regulate/self-correct, he went on to say that there was nothing he could have done about it...

 

[haha]

After admitting he was wrong thinking the markets would self-regulate/self-correct, he went on to say that there was nothing he could have done about it...

Too bad he didn't try suicide.

Ha

 

[Independent]

No he was right then. Unfortunately he did not act on it. When everyone is partying it is hard to be the one turning off the music...

DD

I think this is about right.

I recall the "Irrational Exuberance" comment, and believed the idea more than most people (based more on P/E ratios than on Greenspan's comment), and hence avoided stocks.
I felt like I'd really missed the train in 1999. Now, not so bad.

 

[barbarus]

Greenspan, with his artificially low rates, was a major cause of our present economic disaster.

As others, including myself, have said, future generations will curse him in his grave.

The world would have been much better off if Allen had stuck to his saxophone.

 

[audreyh1]

After admitting he was wrong thinking the markets would self-regulate/self-correct, he went on to say that there was nothing he could have done about it...

He is so wrong on that point. He kept those interest rates too low for too long AND he encouraged people to use the low interest rate environment to take on ARMs and buy houses! He saw nothing wrong with the housing boom, didn't caution against it but rather encouraged lawmakers to let it happen.

Audrey

 

[ziggy29]

After admitting he was wrong thinking the markets would self-regulate/self-correct, he went on to say that there was nothing he could have done about it...

Nothing he could do? When did he say this, and when did he "realize" he was helpless to stop it? The absurdly low interest rates we saw in the aftermath of the dot-com bubble -- combined with attitudes on Capitol Hill that we need to make as many people (regardless of creditworthiness) as possible homeowners -- was the fuel for this bubble.

Frankly, if someone in a leadership role admits that they were powerless to do something about a situation they were appointed to deal with as a leader, they are an ineffectual leader. Lee Iacocca didn't have that attitude. Steve Jobs didn't have that attitude when he returned to save Apple from the brink of irrelevancy. Why wouldn't we expect the head honcho in terms of national monetary policy to do the same?

Frankly, Greenspan's comments indicate either incompetence or impotence. If the Fed Chairman can't influence monetary policy, who can?

 

[Gardnr]

Frankly, Greenspan's comments indicate either incompetence or impotence. If the Fed Chairman can't influence monetary policy, who can?

Yes indeed. He's showing himself to be a bit of a weasel now. Shrugging his shoulders and saying, "what could we do?"

IMO, he's one of the very few individuals who could have really effected the kind of change in direction that was needed to defuse this catastrophe. I'm not saying he could have done it alone but he could have used his stature as the Fed chairman, lauded by all, to get our leadership's attention.

Alas, it didn't happen. And worse, he threw gasoline on the flames.

 

[HFWR]

Nothing he could do? When did he say this, and when did he "realize" he was helpless to stop it?

Try to catch a repeat of the CNBC program on the housing bubble...

House of Cards, Global Economic Collapse, Mortgage Brokers, Investment Bankers, Financial Crisis, Greenspan, Business, Refinance, Credit and Housing Crisis - CNBC.com

CNBC: How housing boom was a house of cards - CNBC TV- msnbc.com

Or, try this:

YouTube - Real Estate Downfall