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Friday, July 25, 2014

Greenspan Speaks But Misses Salient Economy Point

Greenspan Speaks But Misses Salient Economy Point
"One area I was always doubtful about during my tenure [as Federal Reserve Chairman] is how much we could effectively communicate to markets because they were always second-guessing the Fed."
 
That statement came from former head of the Fed Alan Greenspan in an interview with Marketwatch Thursday. Greenspan, who spent his entire career trying to prevent inflation, sees the current market bubbles as a free enterprise problem, not one for the central banks. He asserted the current bubbles cannot be stopped except by letting the markets pop the bubbles themselves. Greenspan also sticks by his position that the Fed didn't cause the financial crisis (in which he probably is correct, but the actions of the Fed since then haven't helped solve the problem which he handles by simply not addressing the issue.)
 
Greenspan also said, "When market bubbles emerge they take on a life of their own. It is difficult to stop them short of a debilitating crunch in the marketplace. I believe central banks that believe they can quell bubbles are living in a state of unrealism." He does not apply unreal to a fiat that is being printed without a market base yet does not think that is damaging.
 
That's where an astute examiner would have interjected a question that was never asked. The question would be: Mr. Greenspan, what kind of bubble was created by the unprecedented Reserve printing press run on the value of the dollar?
 
Since the question was not asked it is not answered by Greenspan. However, others in the economic realm are beginning to question Fed policy, albeit for the wrong reasons. 
 
MIT economist Simon Johnson, former chief economist for the International Monetary Fund thinks the current in the financial system is not being addressed by the Reserve. "Senior Fed officials seem to have slipped back into pre-2008 ways by ignoring concerns about dangerous financial sector behavior," he writes on Project Syndicate. "This is not only unfortunate; it is also dangerous, because the Fed's political position [supporting the current Administration no matter the cost] is much more precarious than its leadership seems to realize."
 
Lest you think Johnson is calling for a curtailment by the Fed in its activities, you'd be wrong. The former central banker for the world wants the Fed to implement immediately key provisions of the Dodd-Frank Financial Reform Act. He wants the big banks--read that as those who got bailouts--to set up living wills so the bank won't be shuttered in a financial collapse and increase their stranglehold on America's struggling economy.
 
Marketwatch's David Weidner said the public's discontent with the big banks could turn into a major campaign issue by 2016. He noted the political Left is most frustrated by the banking situation. "They are not only pressuring the current Administration to keep pressing forward with industry reform but is threatening to make the conduct of big finance a major issue in 2016." Is that the harbinger of a move against the 1% who benefited from the opening rounds of regulation that curtailed Consumer's ability to live? Every time a bill was introduced to "help the consumer" under the current regime, the bankers alone benefitted.
 
What these bootlickers are showing is, like Dodd and Frank and the Fed itself, they know nothing about the way bankers or corporations operate. To stay in business there has to be room for profit. Without profit there is no reason to stay in business. Without profit there are no jobs or standards of living but worse, there is no economy or liberty. That is why American corporations are fleeing in the 'inversion' process Obama wants stopped with more regulation and laws. 
 
Without Fed intervention, most of the big banks would have been swallowed already through their derivatives swaps burdens. The economy would not have as many bubbles in it as market fundamentals would have taken care of them already. The stock markets would be chugging along around the 6,000 level but would be gathering steam instead of still facing a huge bubble inside, and, most importantly, the recession would definitely be in the rearview mirror not still coming at the economy daily.
 
The financial sector bubble is not only larger than it was in 2007, it has the capability of taking out even larger portions of a weakened American economic base than before simply because of the unrestricted printing press the Fed operates.
 
Greenspan feels declines in domestic savings and corporate capital investment are the main reasons for the corrosion in productivity growth and the standard of living. But he doesn't factor in the recession's effects and one-sided effect of the Fed's actions to benefit the financial arena without helping Main Street.
 
But all of those offering opinions from various government facilities miss the main reason for all this turmoil--blatant socialism of a once-free market. Get rid of the ridiculously large mountain of regulation, put the government onto a strictly hands-off policy in the marketplace itself, and things would begin to get back to normal.
 
But the people calling for more are asking for statism which is in direct conflict the principles of liberty this country was founded upon. That includes the learned Greenspan and Johnson right along with the alleged Constitutional Law authority sitting in the White House. If there was a more apt-term than "educated idiots" this trioo would earn it for their complete abandonment and disregard for American founding principles.
 
"I have sworn on the altar of Gad eternal hostility to every form of tyranny over the mind of man."--Thomas Jefferson
 
Please remember all comments and suggestions for or about the Rant are welcomed.--Mike  

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