Former Federal Reserve Chairman Alan Greenspan said the current market turmoil is in many ways "identical" to that which occurred in 1987 and 1998, when the giant hedge fund Long-Term Capital Management nearly collapsed.
"The behavior in what we are observing in the last seven weeks is identical in many respects to what we saw in 1998, what we saw in the stock-market crash of 1987, I suspect what we saw in the land-boom collapse of 1837 and certainly [the bank panic of] 1907," Mr. Greenspan told a group of academic economists in Washington, D.C., last night at an event organized by the Brookings Papers on Economic Activity, an academic journal.
Mr. Greenspan, Fed chairman from 1987 to 2005 and now a private consultant, said business expansions are driven by euphoria and contractions by fear. While economists tend to think the same factors drive expansions and contractions, "the expansion phase of the economy is quite different, and fear as a driver, which is going on today, is far more potent than euphoria."
The euphoria in human nature takes over when the economy is expanding for several years, and leads to bubbles, "and these bubbles cannot be defused until the fever breaks," he said.
Bubbles can't be defused through incremental adjustments in interest rates, Mr. Greenspan suggested. The Fed doubled interest rates in 1994-95 and "stopped the nascent stock-market boom," but when stopped, stocks took off again. "We tried to do it again in 1997," when the Fed raised rates a quarter of a percentage point, and "the same phenomenon occurred."
"The human race has never found a way to confront bubbles," he said.
The Fed raised rates in '94 and '95 because inflation was rising - not because the stock market was a bubble as Greenspan implies. His '97 comment that the 25bps increase was an attempt to deflate the stock market is insane.
And Greenspan thinks there is no way to confront a bubble. How about raising margin requirements? And using regulatory powers? Weird comments from Greenspan.
There 'have been', but they're gone now?!? A few weeks, a couple of months, it'll be over no problem?!!
Dude, Where's My Brain Gone?? ..members of the general public today were shocked to see yet another victim of bullful thinking in full view of the western media. It's like the rest of us, the ones that read, are not in the room.
Time to line up the shot glasses. Will it be Wild Turkey or Jack Black tonight?
Paulson said the economy would pay a "penalty," but insisted that the U.S. and global economies were "very strong."
Strong, but unsound. Like a revolutionary new high-performance jet that easily breaks old limitations of speed and power output and then reliably comes apart in mid-air.
"And I think this will take a while to play out, and almost certainly over time this will have an impact on our economy."
"It's certainly going to be into the weeks, maybe a number of months," he said.
Japan managed to sort out their problems in just 780 weeks or so.
Investors seem to "learn their lesson every seven, eight, 10 years or what have you," he said.
I think with "or what have you" he's referring to that especially intensive educational process that investors go through about every 80 years or so... About the time that the last such learning experience has passed mostly out of living memory.
"Investors seem to learn their lesson every seven, eight, 10 years or what have you..." Didn't Bush want social security funds invested in the markets? Maybe I'm confusing that with weapons of mass destruction. Never mind.
As an Ex-Republican, I couldn't agree more. What freaking self-serving planet were those morons on to suggest self-directed social security accounts? Subprime x 100...
Subprime borrowers with 100% financing need no mods to "bail them out" because they have no financial risk. They are not going to accept a mortgage payment on a investment that is already $100,000 under water in many areas, which is at least 2 to 2 1/2 times comparable rent.
The "bailout" for homeowners is for bond holders. And issuers. But, it won't work even if offered. They may lose their under water house, but they won't be homeless. There will be plenty of houses to rent, especially when the layoffs start causing people to double up.
Paulson said the economy would pay a "penalty," but insisted that the U.S. and global economies were "very strong."
Was that Hank or Pat?
For the entire crew associated with this administration that has been harping about how there will be no spillover from the decline in housing, why shouldn't we solicit Pat Paulson's opinion?
CR - people do become senile over time. Even former Fed chairmen. Perhaps especially those who are starting to realize that the entire life has been but a facade built up around a cult of personality, with little to back up the claims of glory. Remember - never got his PhD. Failed in the economic consulting business. Guy is basically a political hack, and is now trying to salvage his legacy the standard tried and true method - revisionist history. A sad day. And to think people pay hundreds of thousands of dollars to hear this drivel...
And Greenspan thinks there is no way to confront a bubble. How about raising margin requirements? And using regulatory powers? Weird comments from Greenspan.
No, I think Greenspan is dead on here.
Trying to stop a bubble in it's early stages would be like trying to talk a teenager out of falling in love. And if you tried to intervene directly, you'd be hated, attacked, and exiled (or worse if you're actually successful).
Your (presumably) good intentions would result in loss of any power or influence you might have had.
People live for the things that bubbles offer (if only for a short time). Dreams of freedom, power, and wealth are what get people out of bed in the morning and make sitting in a cubicle all day bearable (fear does that too, but bubbles don't form when people are fearful).
Humanity has never found a way to confront bubbles because we've never found a way to selectively shut down those emotional drives that are human nature.... even when logic dictates that it's time to do so.
As characteristically social animals it is essential that humans not be logical. Logic is good for solitary beasts fending for themselves whatever the cost to others. But this doesn't work in societies. We know that to have built these societies, it was necessary to follow an evolutionary path that made us illogical by virtue of the selective power that is survival in numbers.
Greenspan is correct when he says "The human race has never found a way to confront bubbles."
We only deal with bubbles once realization of what we've done creates terror. And running away screaming while everything collapses is not "confrontation".
So who can propose to take peoples' dreams from them? People live for their dreams. But nobody lives to avoid consequences. Only fear can do that.
And no amount of education can turn consequences into dreams.
The fellows who created a little upward movement yesterday are cashing their profits.
Unless the yen moves up now, expect the market to be down, unless the moronic momentum players are still buying.
Probably the only thing you need to play the market besides following the yen is to follow lot size. I doubt very much that the big boys trade in tiny lots, although I suppose that anything is possible.
The distribution of lot size by issue would be interesting.
Thankfully Mr. Greenspan is old and Jewish. Jewish coffins are unlined, unpainted, with rope handles. As Jewish law requires burial in the earth, the base of the coffin has knot holes as well as drilled holes to allow the body contact with the earth to rot and quickly be forgotten. Mazal Tov.
I fail to see why Paulson has any credibility left. He has gone to China umpteen times (I lost track) promising to get them to revalue the yuan. His success rate: 0.
The Fed raised rates in '94 and '95 because inflation was rising - not because the stock market was a bubble as Greenspan implies. His '97 comment that the 25bps increase was an attempt to deflate the stock market is insane.
Looking at the data myself a while back, I came to the conclusion that 94-95 was when the deflation threat first started to materialize, precisely because wealth began to rise faster than earnings and nominal stock prices began accelerating away from nominal GDP.
This would definitely cause inflation, but inflation from credit expansion, not rising incomes. I believe that deflation is ultimately born from credit-driven inflation; hyperinflation from wage inflation.
His '97 comment that the 25bps increase was an attempt to deflate the stock market is insane.
Controlling inflation and deflating the stockmarket might have amounted to exactly the same thing by this point.
I guess it was insane if he actually thought it would work.
Again, I say the key to understanding the Fed since the early-mid 90s is to assume that all their actions were intended to fight deflation.
arbogast mentioned the connection between Ayn Rand and Greenspan.
Greenspan being the Fed Chair is completely contradictory to the brand of economics Greenspan was touting when we spent years as one of the most devoted members of the Rand inner circle.
Sure, maybe he changed his mind and grew up, but oddly, he never really came out and repudiated his old Mises-derived economic thoughts. You could get glimpses of this when he would get asked about the gold standard during Congressional testimony, and his answers were always rather carefully hedged, leaving the door open to his embrace of hard money in his youth.
I sometimes wonder if Greenspan has styled himself as Francisco d'Anconia, the character in Atlas Shrugged that publically played the role of a playboy wastrel to deprive "the looters" of value in his company. Perhaps greenspan never gave up his Randian ways, and instead decided to go undercover in the belly of the beast, goosing the economy with easy money and credit at every turn.
Greenspan wasn't going to take the punchbowl away, instead is was going to spike the drinks even more, knowing that in the end things would all spiral out of control, and the fiat money system would finally be revealed to all as being fraudlent and bankrupt.
At least, that is what Greenspan might be telling himself when he goes off to sleep at night.
You're leaving out the Middle East. Greenspan is the Enabler in Chief of the Bush Administration.
If there is anything that history has taught us (cue Godfather theme), it is that colonial wars cost money. Big money. And the great colonial empires have come apart when the cost grew too high.
Colonizing the Middle East and serving as surrogates for Isreal is really, really expensive. Money was needed.
Presto! Alan Greenspan!
George, you can have all the money I can print to follow my expansionary vision.
"...and the great colonial empires have come apart when the cost grew too high."
Indeed, arbogast. Contrary to conventional wisdom, empires cost more to maintain than the benefits that accrue from them. On the face of it, that seems counterintuitive. It is nevertheless true. In early stages of conquest, the plunder provides a positive cash flow. But administration of the colonies (whether old-style or neo-colonial like ours), and costs of the requisite standing armies, ends up reversing the cost-benefit ratio.
But those imbeciles in the WH keep telling themselves that the 12 trillion in oil under Iraq is worth the price we are paying to get control of it. They evidently were not paying attention in World History 101.
Paulson said estimates of 2 million foreclosures are exaggerated.
There are already 2.3 million delinquices already. Now more than half will be addressed before foreclosure but there are still millions of loans that haven't even seen their first reset either. I'll stick with my 4 million based on the rising percentage going all the way to REO and the effect those have on comps thus denying an increasing number of debtors refinancing alternatives.
But those imbeciles in the WH keep telling themselves that the 12 trillion in oil under Iraq is worth the price we are paying to get control of it. They evidently were not paying attention in World History 101.
I don't think the oil was the reason for invading Iraq. It is now just a kind of excuse. Iraq was invaded because the Zionists/Neocons thought Saddam was a threat to Israel and wanted his regime destroyed. And they duped the administration into doing it for them. Now that Iraq is a vast mess the only powers pleased are Israel (you don't hear Israel complaining about the mess in Iraq) and Iran, an unintended beneficiary. But the Neocons now want to goad Bush into getting rid of the regime in Iran. Can he be duped again? Stay tuned.
Doesn't Greenspan conveniently forget elmininating the reserve requirements for banks on all time deposits and transaction accounts around that time - with sweep account innovations converting current accounts into time deposits.
very soon all that stopped banks from lending as they saw fit was the Basel accord on accounting requirements.
The Fed lost all ability to tighten the money supply from that time on IMO. All they can do is loosen it.
Weren't there some shennanigans with a decoupling of the Prime Rate in that 1995 framework too ?
Ever since I read Frank Rich's "Greatest Story very Sold" I'm totally sceptical of anything that comes from the current crop of government apparatchiks and always, ALWAYS look for the angle. They are all continuously trying to form public opinion - truth can go hang.
Bankruptcies surged 34% in August from a year ago, and nearly 538,000 filings were made nationwide in the first eight months of the year - a 48% jump from '06.
About 77,000 filings for court protection from creditors were filed by companies and individuals last month, according to Jupiter eSources, which tracks court records.
Corporate filings to liquidate or reorganize in Chapter 11 bankruptcy proceedings totaled 4,074 in the January-to-August period, a 21% jump over the first eight months of '06.
The August statistics are "early signs of a significant increase in business filings," according to a Jupiter eSources exec.
If the pace of all filings continues for the remainder of the year, '07 will re-cord more than 806,000 new bankruptcies, a 37% increase from last year.
on "where the !£$% did 'conduits' and 'SIVs' come from, and why haven't we heard of them before, and WTF were the people who created them thinking, since obviously they were going to blow up?"
Answer: they are a regulatory and tax arbitrage dodge, and they were effectively hidden from regulators and enabled by the rating agencies.
Well, Iran is a little different. And I don't think it's off topic...at all. Particularly, if the subject is Alan Greenspan.
The thing about Iran is that the Iranian regime is behaving essentially completely differently than Saddam did before the invasion.
Saddam really went quite far out of his way to:
a) destroy weapons
b) open up everything to show he had no WMD
We invaded Iraq on the basis of a fairytale concocted in, shall we say, Alan Greenspan's living room.
Iran is completely different.
Completely different. Totally.
Various powers around the globe (can you say "China", "Russia"?) have noticed that Iraq has been an unmitigated disaster for the U.S. It really has. It has destroyed our ground forces (Bush is going to withdraw some troops because he has to to preserve the Army) and multiplied our bankruptcy and dependency on the rest of the world for cash imports.
So, now that Iraq is winding down (not very quickly, but winding down), various powers around the globe that would like to see us weakened further are looking for an opportunity.
Well, Opportunity One is Iran. Bombing Iran will be a catastrophe. Admittedly, that grotesque "Little Man" Sarkozy seems to have tilted Europe slightly toward the idea of bombing Iran, but the reality is that the constituency for bombing Iran would fit nicely in Alan Greenspan's living room...and probably already has...on numerous occasions.
And, voila! For some peculiar reason, the Iranian "regime" is behaving 180 degrees different than the way Saddam behaved. They are bragging about stuff they have been proven not to have. They are basically telling Bush to knock this chip off my shoulder.
Gosh. Could someone be whispering in their ear? Could the redevelopment funds already have been promised by China? Gee. What's going on?
I'll tell you what's going on. The Bush Administration is being played like an accordian by people who don't like us.
"And Greenspan thinks there is no way to confront a bubble. How about raising margin requirements? And using regulatory powers? Weird comments from Greenspan."
CR-
agree completely. Exact same as today, it is long past the time for them to remove the punchbowl.
The take-away I got is that banks are exceedingly loath to allow the SIV assets (CDOs, etc.) to be sold off, because that would reveal how bad things actually are, so the banks will support them by any means necessary until how-bad-things-actually-are is obvious to everyone, at which point they will probably all dump at once.
Throughout this drama, it has been possible to predict everyone's actions by assuming that they will do whatever makes them look good this month. Bleagh.
The SIV/conduit problems are a good example: leverage can make good assets bad through illiquidity.
Sure some of the "asset-backed" stuff in these vehicles is toxic, but much of it isn't. The people that put the structures together thought that "AAA" meant "Liquid", period, end of story.
Now they find out that leverage and liquidity work in vicious circles. Rush to reduce leverage, liquidity goes "poof".
In most cases insolvency is a bigger problem than illiquidity. However, time works wonders on insolvency: with the luxury of decades to work out its problems, Japan has not suffered a "crisis" as a result of its credit cycle.
The real problem is when insolvency gets transformed into illiquidity. The transformation mechanism is leverage and funding mis-matches (borrow ultra-short, lend long). In the U.S., far more than was the case in Japan, that mechanism is pervasive and now fully engaged.
Illiquidity feeds back into the real economy much faster and with greater violence than insolvency. It robs the economy of time to solve its problems. That's the most likely cause of a recession, as Shortcourage recently pointed out.
And then he hugged his teddy bear really tight.
Didn't he call a housing bottom a few months ago?
Just checking.
Cheers,
prat
"Heck of a blow job Paulie"
Always Proud Gay Pride Teddy Bears
praetorian, did you catch Greenspan's comments?
Former Federal Reserve Chairman Alan Greenspan said the current market turmoil is in many ways "identical" to that which occurred in 1987 and 1998, when the giant hedge fund Long-Term Capital Management nearly collapsed.
"The behavior in what we are observing in the last seven weeks is identical in many respects to what we saw in 1998, what we saw in the stock-market crash of 1987, I suspect what we saw in the land-boom collapse of 1837 and certainly [the bank panic of] 1907," Mr. Greenspan told a group of academic economists in Washington, D.C., last night at an event organized by the Brookings Papers on Economic Activity, an academic journal.
Mr. Greenspan, Fed chairman from 1987 to 2005 and now a private consultant, said business expansions are driven by euphoria and contractions by fear. While economists tend to think the same factors drive expansions and contractions, "the expansion phase of the economy is quite different, and fear as a driver, which is going on today, is far more potent than euphoria."
The euphoria in human nature takes over when the economy is expanding for several years, and leads to bubbles, "and these bubbles cannot be defused until the fever breaks," he said.
Bubbles can't be defused through incremental adjustments in interest rates, Mr. Greenspan suggested. The Fed doubled interest rates in 1994-95 and "stopped the nascent stock-market boom," but when stopped, stocks took off again. "We tried to do it again in 1997," when the Fed raised rates a quarter of a percentage point, and "the same phenomenon occurred."
"The human race has never found a way to confront bubbles," he said.
The Fed raised rates in '94 and '95 because inflation was rising - not because the stock market was a bubble as Greenspan implies. His '97 comment that the 25bps increase was an attempt to deflate the stock market is insane.
And Greenspan thinks there is no way to confront a bubble. How about raising margin requirements? And using regulatory powers? Weird comments from Greenspan.
Best to all.
BP comic from Bernanke Panky
Who could tame me?
Who could capture my wild flame and harness it to provide heat but not devastation?
Who could ride the thunder and bottle the lightning?
YOU! Brave, asbestos-gloved you!
To coin a phrase, WTF???
There 'have been', but they're gone now?!? A few weeks, a couple of months, it'll be over no problem?!!
Dude, Where's My Brain Gone?? ..members of the general public today were shocked to see yet another victim of bullful thinking in full view of the western media. It's like the rest of us, the ones that read, are not in the room.
Time to line up the shot glasses. Will it be Wild Turkey or Jack Black tonight?
Paulson said the economy would pay a "penalty," but insisted that the U.S. and global economies were "very strong."
Strong, but unsound. Like a revolutionary new high-performance jet that easily breaks old limitations of speed and power output and then reliably comes apart in mid-air.
"And I think this will take a while to play out, and almost certainly over time this will have an impact on our economy."
"It's certainly going to be into the weeks, maybe a number of months," he said.
Japan managed to sort out their problems in just 780 weeks or so.
Investors seem to "learn their lesson every seven, eight, 10 years or what have you," he said.
I think with "or what have you" he's referring to that especially intensive educational process that investors go through about every 80 years or so... About the time that the last such learning experience has passed mostly out of living memory.
"Investors seem to learn their lesson every seven, eight, 10 years or what have you..." Didn't Bush want social security funds invested in the markets? Maybe I'm confusing that with weapons of mass destruction. Never mind.
FFDIC
As an Ex-Republican, I couldn't agree more. What freaking self-serving planet were those morons on to suggest self-directed social security accounts? Subprime x 100...
The Wall Street Journal
Is WaMu Out on Ledge?
Earlier Stumbles Cut Into Bank's Credibility On Mortgage Holdings
Analysts, Investors Wary of WaMu Assurances - WSJ.com
Weird comments from Greenspan.
Me thinks he doth protest too much...
I suspect he's getting the idea that his legacy is in some serious danger now.
Subprime borrowers with 100% financing need no mods to "bail them out" because they have no financial risk. They are not going to accept a mortgage payment on a investment that is already $100,000 under water in many areas, which is at least 2 to 2 1/2 times comparable rent.
The "bailout" for homeowners is for bond holders. And issuers. But, it won't work even if offered. They may lose their under water house, but they won't be homeless. There will be plenty of houses to rent, especially when the layoffs start causing people to double up.
Read Michael Lewis' deadly accurate satire which closes with this priceless quote: "But never again will I go one-on-one again with poor people. They're sharks." A Wall Street Trader Draws Some Subprime Lessons: Michael Lewis - Bloomberg.com
Well, better that the economy "pay the penalty" than he and his IB buddies.
Paulson said the economy would pay a "penalty," but insisted that the U.S. and global economies were "very strong."
Was that Hank or Pat?
For the entire crew associated with this administration that has been harping about how there will be no spillover from the decline in housing, why shouldn't we solicit Pat Paulson's opinion?
CR - people do become senile over time. Even former Fed chairmen. Perhaps especially those who are starting to realize that the entire life has been but a facade built up around a cult of personality, with little to back up the claims of glory. Remember - never got his PhD. Failed in the economic consulting business. Guy is basically a political hack, and is now trying to salvage his legacy the standard tried and true method - revisionist history. A sad day. And to think people pay hundreds of thousands of dollars to hear this drivel...
Weird comments from Greenspan.
I'm with bofiz; AG's in total CYA mode.
My opinion of Bloomberg just went from B- to AA with that link GP.
And kudos to you Moto for "Bernanke Panky"...which brings us back to Paulson and hanky panky.
I saw the Hank interview by Darren Gersh on Nightly Business Report, and Hank is one of the worst BS'ers I've ever seen.
His stuttering is really a giveaway.
Uhhhh, wwwhhhattt's uuuu...uuuu..uuuppppp, ddddddooooooccc......ooccc.
Hank the crook.
And Greenspan thinks there is no way to confront a bubble. How about raising margin requirements? And using regulatory powers? Weird comments from Greenspan.
No, I think Greenspan is dead on here.
Trying to stop a bubble in it's early stages would be like trying to talk a teenager out of falling in love. And if you tried to intervene directly, you'd be hated, attacked, and exiled (or worse if you're actually successful).
Your (presumably) good intentions would result in loss of any power or influence you might have had.
People live for the things that bubbles offer (if only for a short time). Dreams of freedom, power, and wealth are what get people out of bed in the morning and make sitting in a cubicle all day bearable (fear does that too, but bubbles don't form when people are fearful).
Humanity has never found a way to confront bubbles because we've never found a way to selectively shut down those emotional drives that are human nature.... even when logic dictates that it's time to do so.
As characteristically social animals it is essential that humans not be logical. Logic is good for solitary beasts fending for themselves whatever the cost to others. But this doesn't work in societies. We know that to have built these societies, it was necessary to follow an evolutionary path that made us illogical by virtue of the selective power that is survival in numbers.
Greenspan is correct when he says "The human race has never found a way to confront bubbles."
We only deal with bubbles once realization of what we've done creates terror. And running away screaming while everything collapses is not "confrontation".
So who can propose to take peoples' dreams from them? People live for their dreams. But nobody lives to avoid consequences. Only fear can do that.
And no amount of education can turn consequences into dreams.
Or fear for that mattter.
ac, you've really been a hoot lately.
CR,
The Greenspan comments are worth a separate post.
He is certainly the man who caused all this, and caused it for a not-so-hidden agenda of war in Iraq and destroying social services in the US.
For those who need to know more about Alan Greenspan, start with his special relationship with Ayn Rand.
Then recall the phrase of a famous surgeon, "There are no mysteries in medicine, just mysterious doctors."
The yen has opened lower this morning.
The fellows who created a little upward movement yesterday are cashing their profits.
Unless the yen moves up now, expect the market to be down, unless the moronic momentum players are still buying.
Probably the only thing you need to play the market besides following the yen is to follow lot size. I doubt very much that the big boys trade in tiny lots, although I suppose that anything is possible.
The distribution of lot size by issue would be interesting.
Paulson said estimates of 2 million foreclosures are exaggerated.
Cue Cramer
Thankfully Mr. Greenspan is old and Jewish. Jewish coffins are unlined, unpainted, with rope handles. As Jewish law requires burial in the earth, the base of the coffin has knot holes as well as drilled holes to allow the body contact with the earth to rot and quickly be forgotten. Mazal Tov.
I fail to see why Paulson has any credibility left. He has gone to China umpteen times (I lost track) promising to get them to revalue the yuan. His success rate: 0.
The Fed raised rates in '94 and '95 because inflation was rising - not because the stock market was a bubble as Greenspan implies. His '97 comment that the 25bps increase was an attempt to deflate the stock market is insane.
Looking at the data myself a while back, I came to the conclusion that 94-95 was when the deflation threat first started to materialize, precisely because wealth began to rise faster than earnings and nominal stock prices began accelerating away from nominal GDP.
This would definitely cause inflation, but inflation from credit expansion, not rising incomes. I believe that deflation is ultimately born from credit-driven inflation; hyperinflation from wage inflation.
His '97 comment that the 25bps increase was an attempt to deflate the stock market is insane.
Controlling inflation and deflating the stockmarket might have amounted to exactly the same thing by this point.
I guess it was insane if he actually thought it would work.
Again, I say the key to understanding the Fed since the early-mid 90s is to assume that all their actions were intended to fight deflation.
arbogast mentioned the connection between Ayn Rand and Greenspan.
Greenspan being the Fed Chair is completely contradictory to the brand of economics Greenspan was touting when we spent years as one of the most devoted members of the Rand inner circle.
Sure, maybe he changed his mind and grew up, but oddly, he never really came out and repudiated his old Mises-derived economic thoughts. You could get glimpses of this when he would get asked about the gold standard during Congressional testimony, and his answers were always rather carefully hedged, leaving the door open to his embrace of hard money in his youth.
I sometimes wonder if Greenspan has styled himself as Francisco d'Anconia, the character in Atlas Shrugged that publically played the role of a playboy wastrel to deprive "the looters" of value in his company. Perhaps greenspan never gave up his Randian ways, and instead decided to go undercover in the belly of the beast, goosing the economy with easy money and credit at every turn.
Greenspan wasn't going to take the punchbowl away, instead is was going to spike the drinks even more, knowing that in the end things would all spiral out of control, and the fiat money system would finally be revealed to all as being fraudlent and bankrupt.
At least, that is what Greenspan might be telling himself when he goes off to sleep at night.
A=A
I just posted an article called Gasoline Prices and the Business Cycle on my blog for anyone who might be interested.
There's a chart of year over year changes in the price of inflation adjusted gasoline.
I think it is warning of problems (as if we don't have enough already).
USA Today
State-by-state mortgage delinquencies and foreclosures (firgures are 2nd qtr '07, not seasonally adjusted.)
State-by-state mortgage delinquencies and foreclosures - USATODAY.com
"The human race has never found a way to confront bubbles," says the man who never tried.
Maybe I just missed that Congressional testimony where he was imploring Congress to exericse greater regulatory authority to deflate a bubble.
Investors seem to "learn their lesson every seven, eight, 10 years or what have you," he lamely said to brush aside his personal culpability.
e.g. recession every 10 years in the average business cycle; seven, eight, or what have you when the Fed is asleep at the switch.
Stirner,
You're leaving out the Middle East. Greenspan is the Enabler in Chief of the Bush Administration.
If there is anything that history has taught us (cue Godfather theme), it is that colonial wars cost money. Big money. And the great colonial empires have come apart when the cost grew too high.
Colonizing the Middle East and serving as surrogates for Isreal is really, really expensive. Money was needed.
Presto! Alan Greenspan!
George, you can have all the money I can print to follow my expansionary vision.
"...and the great colonial empires have come apart when the cost grew too high."
Indeed, arbogast. Contrary to conventional wisdom, empires cost more to maintain than the benefits that accrue from them. On the face of it, that seems counterintuitive. It is nevertheless true. In early stages of conquest, the plunder provides a positive cash flow. But administration of the colonies (whether old-style or neo-colonial like ours), and costs of the requisite standing armies, ends up reversing the cost-benefit ratio.
But those imbeciles in the WH keep telling themselves that the 12 trillion in oil under Iraq is worth the price we are paying to get control of it. They evidently were not paying attention in World History 101.
Paulson said estimates of 2 million foreclosures are exaggerated.
There are already 2.3 million delinquices already. Now more than half will be addressed before foreclosure but there are still millions of loans that haven't even seen their first reset either. I'll stick with my 4 million based on the rising percentage going all the way to REO and the effect those have on comps thus denying an increasing number of debtors refinancing alternatives.
Looks like Harley Davidson is another company not suffering from contagion in any way. Sees a shipments for Q3 now at 86-88k instead of 91-95k.
And who makes an earnings release at this time?
But those imbeciles in the WH keep telling themselves that the 12 trillion in oil under Iraq is worth the price we are paying to get control of it. They evidently were not paying attention in World History 101.
I don't think the oil was the reason for invading Iraq. It is now just a kind of excuse. Iraq was invaded because the Zionists/Neocons thought Saddam was a threat to Israel and wanted his regime destroyed. And they duped the administration into doing it for them. Now that Iraq is a vast mess the only powers pleased are Israel (you don't hear Israel complaining about the mess in Iraq) and Iran, an unintended beneficiary. But the Neocons now want to goad Bush into getting rid of the regime in Iran. Can he be duped again? Stay tuned.
Doesn't Greenspan conveniently forget elmininating the reserve requirements for banks on all time deposits and transaction accounts around that time - with sweep account innovations converting current accounts into time deposits.
Are Reserve Requirements Still Binding? - Federal Reserve Bank of New York
The Fed lost all ability to tighten the money supply from that time on IMO. All they can do is loosen it.
Weren't there some shennanigans with a decoupling of the Prime Rate in that 1995 framework too ?
Ever since I read Frank Rich's "Greatest Story very Sold" I'm totally sceptical of anything that comes from the current crop of government apparatchiks and always, ALWAYS look for the angle. They are all continuously trying to form public opinion - truth can go hang.
-K
Bankruptcy filings climb 34% in August
Bankruptcy filings climb 34% in August
Thursday, September 6th 2007, 4:00 AM
Bankruptcies surged 34% in August from a year ago, and nearly 538,000 filings were made nationwide in the first eight months of the year - a 48% jump from '06.
About 77,000 filings for court protection from creditors were filed by companies and individuals last month, according to Jupiter eSources, which tracks court records.
Corporate filings to liquidate or reorganize in Chapter 11 bankruptcy proceedings totaled 4,074 in the January-to-August period, a 21% jump over the first eight months of '06.
The August statistics are "early signs of a significant increase in business filings," according to a Jupiter eSources exec.
If the pace of all filings continues for the remainder of the year, '07 will re-cord more than 806,000 new bankruptcies, a 37% increase from last year.
Bloomberg News
Harley-Davidson withdraws 2009 guidance
Harley-Davidson cutting motorcycle shipment targets
Gillian Tett:
FT.com / Columnists / GillianTett - Why financiers have missed the new monster
on "where the !£$% did 'conduits' and 'SIVs' come from, and why haven't we heard of them before, and WTF were the people who created them thinking, since obviously they were going to blow up?"
Answer: they are a regulatory and tax arbitrage dodge, and they were effectively hidden from regulators and enabled by the rating agencies.
Nothing new, but a good summary.
Well, Iran is a little different. And I don't think it's off topic...at all. Particularly, if the subject is Alan Greenspan.
The thing about Iran is that the Iranian regime is behaving essentially completely differently than Saddam did before the invasion.
Saddam really went quite far out of his way to:
a) destroy weapons
b) open up everything to show he had no WMD
We invaded Iraq on the basis of a fairytale concocted in, shall we say, Alan Greenspan's living room.
Iran is completely different.
Completely different. Totally.
Various powers around the globe (can you say "China", "Russia"?) have noticed that Iraq has been an unmitigated disaster for the U.S. It really has. It has destroyed our ground forces (Bush is going to withdraw some troops because he has to to preserve the Army) and multiplied our bankruptcy and dependency on the rest of the world for cash imports.
So, now that Iraq is winding down (not very quickly, but winding down), various powers around the globe that would like to see us weakened further are looking for an opportunity.
Well, Opportunity One is Iran. Bombing Iran will be a catastrophe. Admittedly, that grotesque "Little Man" Sarkozy seems to have tilted Europe slightly toward the idea of bombing Iran, but the reality is that the constituency for bombing Iran would fit nicely in Alan Greenspan's living room...and probably already has...on numerous occasions.
And, voila! For some peculiar reason, the Iranian "regime" is behaving 180 degrees different than the way Saddam behaved. They are bragging about stuff they have been proven not to have. They are basically telling Bush to knock this chip off my shoulder.
Gosh. Could someone be whispering in their ear? Could the redevelopment funds already have been promised by China? Gee. What's going on?
I'll tell you what's going on. The Bush Administration is being played like an accordian by people who don't like us.
"And Greenspan thinks there is no way to confront a bubble. How about raising margin requirements? And using regulatory powers? Weird comments from Greenspan."
CR-
agree completely. Exact same as today, it is long past the time for them to remove the punchbowl.
Paul Davies at FT on SIV restructuring:
FT.com / Capital Markets - SIV sector takes notes of Cairn’s restructure
The take-away I got is that banks are exceedingly loath to allow the SIV assets (CDOs, etc.) to be sold off, because that would reveal how bad things actually are, so the banks will support them by any means necessary until how-bad-things-actually-are is obvious to everyone, at which point they will probably all dump at once.
Throughout this drama, it has been possible to predict everyone's actions by assuming that they will do whatever makes them look good this month. Bleagh.
Good grief, Chris and arbogast.
Your presence on CR indcates you have some economic analytic acuity. Why don't we stick to that. Geopolitical analysis doesn't seem to be a forte.
The SIV/conduit problems are a good example: leverage can make good assets bad through illiquidity.
Sure some of the "asset-backed" stuff in these vehicles is toxic, but much of it isn't. The people that put the structures together thought that "AAA" meant "Liquid", period, end of story.
Now they find out that leverage and liquidity work in vicious circles. Rush to reduce leverage, liquidity goes "poof".
In most cases insolvency is a bigger problem than illiquidity. However, time works wonders on insolvency: with the luxury of decades to work out its problems, Japan has not suffered a "crisis" as a result of its credit cycle.
The real problem is when insolvency gets transformed into illiquidity. The transformation mechanism is leverage and funding mis-matches (borrow ultra-short, lend long). In the U.S., far more than was the case in Japan, that mechanism is pervasive and now fully engaged.
Illiquidity feeds back into the real economy much faster and with greater violence than insolvency. It robs the economy of time to solve its problems. That's the most likely cause of a recession, as Shortcourage recently pointed out.
And then he hugged his teddy bear really tight.
Elvis, for some reason I found that crack cough-coffee-through-nose-funny.
Maybe it was your timing.
Since when did Barney Frank become an interest rate expert?
Katrina will probably miss New Orleans