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"Down the Memory Hole," Alan Greenspan Style
By Stephen Lendman (about the author) Page 1 of 3 page(s)
For OpEdNews: Stephen Lendman - Writer
He's back and in denial in a March 11 Wall Street Journal op-ed headlined: "The Fed Didn't Cause the Housing Bubble." He lied, the way he did throughout his career and for 18.5 years as Fed chairman. How else could he have kept the job, be knighted in the UK for his "contribution to global economic stability, wisdom and skill," then afterwards be extolled by the Money Trust he enriched.
So now he's preserving his "legacy" by expunging its dark side the way Orwell described in 1984 - "down the memory hole," a convenient slot for "any document....due for destruction," politically inconvenient truths to be erased to preserve only sanitized versions for the public. It's called historical revisionism, but even some on the right aren't convinced.
The Ludwig von Mises Institute is a libertarian research and educational center espousing the Austrian School economics of its namesake. Robert Murphy is one of its adjunct scholars, and in an April 14, 2008 article he asked: "Did the Fed Cause the Housing Bubble?"
"The case....is straightforward," he stated. "...Greenspan slashed the federal funds target from 6.5% in January 2001 down to a ridiculous 1% by June 2003. After holding rates at 1% for a year, the Fed then steadily ratcheted them back up to 5.25% by June 2006," a pumping and popping process that "seemed to be more than just a coincidence." It led to speculative "malinvestments," then needing a "recession" to correct.
"The Fed's role in the housing boom and bust is a classic illustration of the Austrian business cycle theory," according to Murphy. "Indeed, the Misesian explanation is so compelling that more and more economists and financial analysts are being persuaded." But not Greenspan who made his own case and got the Wall Street Journal to publish it. The problem is what he said, even worse what he omitted.
That as Fed chairman he led a pump and dump scheme, a financial coup d'etat, to defraud the public for Wall Street. It continues unabated, with new schemes, sucking trillions of dollars of wealth from the many to the few through fraudulently engineered housing, asset, and debt bubbles, illegally offshoring vast sums of capital globally, and shifting government assets to private interests, then their liabilities onto the government leaving taxpayers stuck with the bill.
Across the board, his Fed tenure outraged William Greider enough to call him one of "the most duplicitous figures (ever) in modern American government" who used his position to "corrupt the political dialogue" to sell snake oil to Congress and the public and be a willing co-conspirator in the theft of trillions going back to the early 1980s before his Fed days. He championed derivatives, securitization, and deregulation. He believed unfettered markets work best so let them and told a congressional committee in the mid-1990s:
"Risks in financial markets, including derivative markets, are being regulated by private parties. There is nothing involved in federal regulation per se which makes it superior to market regulation." In other words, let capital operate freely, plunder at will, and have no regulatory restraints regardless of the harm caused.
He sanctioned fraud as a tool of the Money Trust, and as Fed chairman engineered multiple bubbles in stocks, housing, mortgages, bonds, derivatives, currencies, and commodities, yet took no responsibility for the fallout. When asked, he said he has "no regrets on any of the Federal Reserve's policies that we initiated." In fact, he championed them.
He let house prices become an $8 trillion wealth bubble, yet had regulatory authority to prevent it. He chided his critics, ignored the public interest, and even encouraged use of risky no down payment adjustable rate mortgages (including subprime ones) at the worst possible time to buy property. He bears full responsibility for the greatest ever economic collapse costing millions their homes, jobs, savings, pensions, and futures - yet he has "no regrets" for any of his actions.
Here's his account of the housing bubble with a warning to the unwary. Take a strong dose of antacid before reading.
Greenspan admits that "lower interest rates spawned the speculative euphoria (but the) rate that matters was not the federal-funds rate. (It was) the rate on long-term, fixed-rate mortgages....The correlation between home prices and mortgage rates was highly significant, and a far better indicator of rising home prices than the fed-funds rate."
While it's true that longer rates affect mortgage ones, as important is how investors view the economy and prospects for inflation. In addition, short rates affect all others. They influence longer rates, including on Treasury notes, bonds and mortgages. Markets set all rates except one, Fed-funds, but it's the prime mover for others with added power from the central bank's bully pulpit.
Significant also is the close correlation between mortgage and Fed-funds rates. From 1971 - 2002, the average spread between them was 2.85%. Thereafter the relationship changed for a reason - because Fed- funds fell so low while mortgage rates bottomed at around 5.75% and didn't top 6% again until the Fed target rate approached 4%. If a 2.85% spread had held, 30-year mortgages would have been sub-4%. Today at 0% Fed-funds, 30-year fixed-rate mortgages are around 5%, and take note - historically the lowest ever 20th and 21st century mortgage rate was around 4.7% right after WW II.
The views expressed in this article are the sole responsibility of the author
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