From Bloomberg:
Greenspan Legacy Submits to Its First Review
Alan Greenspan didn’t go quietly from the global stage when he retired as chairman of the Federal Reserve in January. His speeches are still widely reported, his economic views and forecasts instantly disseminated.
It would probably be better if they weren’t.
His latest “forecast” — that the worst of the housing slump is over — was rudely challenged Friday when the Commerce Department said October housing starts plunged 14.6 percent from the prior month to a six-year low. Starts were down 27.4 percent in October from a year earlier; single-family starts have fallen by more than a third since the start of the year. Housing permits declined for the ninth consecutive month, a record.
Having presided over the late 1990s stock-market bubble, and having cut interest rates aggressively to clean up the mess when it burst, Greenspan has a vested interest in the health of the housing market. If the residential real-estate boom ends badly, as all bubbles do, he could go down in history as a “DBCB,” or double-bubble central banker.
No wonder Greenspan is laying out a new framework for analyzing the once-soaring property market. In a speech to a private group in Canada last month, Greenspan said the housing boom wasn’t a response to the “1 percent fed funds rate or from the Fed’s easing. It came from the collapse of the Berlin Wall.”
Let’s just say it’s good he’s writing his own life story. His economic theories might not stand up under objective analysis.
…
As for his legacy, the early assessment of Greenspan’s role in recent asset bubbles isn’t exactly exculpatory, according to economists who participated in the Cato Institute’s 24th Annual Monetary Conference, “Federal Reserve Policy in the Face of Crises,” on Nov. 16.“Among the consequences of the policy of maintaining interest rates at an inappropriate low level were credit and mortgage-market distortions, discouragement of personal savings, incipient inflation, and depreciation of the dollar foreign exchange rate,” said economist Anna Schwartz.
Keep in mind that the people at Cato are Greenspan’s friends.
“1 percent fed funds rate or from the Fed’s easing. It came from the collapse of the Berlin Wall.’’
I’m surprised he didn’t get laughed out of the room for that one.
Remember King Al is no market timer. Go read what he said about the 2000 recession and the dot.com bust. He believes the fed should not be proactive, rather reactive. Wait for the bust and then proceed. I’m not debating that, although there is a great argument on the opposite point of view. However, take his views on any market with a grain of salt!!
Mr. Greenspan’s comments arre quoted in an add the NAR took out in this past Sunday’s Bergen Record real estate section. I wonder how Bernanke feels about Greenspan still commanding so much attention?