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Thursday, March 28, 2024

Greenspan, Please

Graham Summers’ thoughts on Greenspan’s eventual retirement, i.e., it couldn’t be too soon. 

Greenspan, Please, Retire Already!

Originally I was going to write an essay on two international mutual funds for you today. However, in light of the recent comments by Alan Greenspan, that essay has been relegated to tomorrow. Enough is enough.

Since retiring from his post as Chairman of the Federal Reserve, Alan Greenspan has simply refused to go away. Some commentators have taken a cute approach to handling this topic, comparing Greenspan to a “guest” who just won’t leave a party. The truth is that Greenspan is no guest. None of us invited/ voted for him. And as for the party… that all ended in 2005 and now everyone’s hung over and looking for their wallets (all empty).

No, Greenspan is not a guest. He’s a nuisance. And he needs to go away. Few people in history have been rewarded for such a staggering display of incompetence. Even fewer have managed to bungle things as much while shirking any and all responsibility for their actions.

The full scale of Greenspan’s bungling requires more space than this e-letter allows. But anyone looking for an in depth look at Greenspan’s career would do well to read hedge fund manager Jeremy Grantham’s 1Q08 shareholder letter. The particular essay is titled Immoral Hazard.

However, it is Greenspan’s recent actions, not his tenure as Fed Chairman, that I wish to focus on today. Since retiring, Greenspan has written a book, blaming the various administrations he served under for what occurred during his time as Fed Chairman. He’s also written a Financial Times article absolving himself from any and all responsibility for the housing bubble.

He’s also gone on a number of speaking engagements, charging $100,000 per hour. Let that sink in for a moment….

Alan Greenspan, the man who admitted to John Stewart of the Daily Show that the Fed manipulates the market, the man who didn’t believe bubbles could exist —at least not until after he retired, the man who failed to see the housing bubble forming despite the fact housing prices had risen more than two standard deviations from their historic relationship to incomes (a 1 in 80 year event)… that guy earns six figures per speaking engagement.

As a side note…Who in their right mind would pay Greenspan a cent, let alone $100K to talk about anything? Has anyone ever read any of his testimony to congress? His statements are virtually incomprehensible.

Aside from this, Greenspan has been popping up in the media giving forecasts for whether we’re in a recession or not. In December 2007, he told NPR that the chances of a recession were rising. In February he was back telling BusinessWeek that there was a 50% chance of the US entering a recession. In early June he said there was a “reduced possibility” of a deep recession. He then did a 180 last week saying that “we are on the brink of a recession.”

In truth, Alan Greenspan has done a lot since retirement. The one thing he hasn’t done is actually retire and go away. I wish he would. His policies have made me, you and everyone in this country poorer. He created two bubbles that wiped out trillions of dollars’ worth of household wealth. And he began the destruction of our currency that continues to unfold today.

Greenspan should be vilified, not revered. There were many decades in this country when people didn’t even know who the Fed Chairman was. In fact, there were whole periods when we didn’t even have a central bank. Thanks to Greenspan and his successor, Ben Bernanke, we may enter another such period in the next couple of years.

Alan, please stop speaking to the media. Leave us alone with our shameful currency and depreciating housing prices. Go read a book or something. I suggest Greenspan’s Bubbles by William Fleckenstein.

Graham Summers is the founder of GPS Capital Research.

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