Alan Greenspan acquired too much power and went out of his way to railroad regulators. It was a classic "absolute power corrupts absolutely" and his flooding the markets with dollar liquidity at every crisis completely destroyed any concepts of moral hazard, of which we are still living with the consequences to this day.
He set the stage for the financial crisis that started crumbling a year after he left the fed chair. It wasn't all his fault (politicians lost any spine and bankers any sense), but he was the conductor.
He was a believer in the idea that banks would never act against their own long term interests in order to make money quickly because that would be an existential crisis for the bank.
Shortly after he left a bank with over 150 years of history collapsed due to exactly that sort of mismanagement, triggering a crisis for the entire banking sector.
And when production for a system I built burns down the month after I leave my job, the next guy they hire was actually the culprit! Greenspan was seen as responsible for the dot-com bust as well which was solidly in the center of his tenure.
The new IT manager walks into his office. He sits down and goes through his desk and finds three envelopes with the numbers 1, 2, and 3 on them with the attached letter:
Congratulations on your new job. To help you out, I've enclosed three pieces of advice to follow when you encounter an intractable problem. Open them in order.
A short few months later there was a significant production outage. Things wouldn't work and management was getting angry. After a long day of angry meetings he went to his desk and opened the first letter. It read "Blame it on your predecessor."
The next day in the meetings he blamed it on his predecessor and told of all the things that weren't done right... routine patching left undone, documentation in disarray. Upper management grumbled but agreed to give him the time to fix it.
Two years later there was another outage. This one went on for a day or two and management was once again getting angry about things and so he went to his desk and pulled out the second letter. "Blame it on the hardware."
With that, he went in pointing out that they were years behind on keeping the hardware itself up to date. Upper management grumbled again but agreed to a budget that allowed him to update the hardware.
For a while, everything was smooth and then it hit... another outage. He went to his desk and opened the third letter. "Prepare three envelopes."
There was a stimulus check that went out around that time. I felt it insane that I was receiving a check when nobody in my life was negatively impacted, the economy didn’t seem hurt (no more then when you’re up then down at a blackjack table), it was just a rebalancing of people’s portfolios values. Turns out that started the wave of completely untargeted stimulus/aide that would come at every economic faltering. I wish we would at least try to identify who is in need during these times. It drives me crazy when I would see the lines at Gucci and LV type stores backed up every week a Covid check went out.
TLDR - Why make it harder for people to get help on the basis that some people might get help who don't deserve it?
means testing kills the usefulness of these kinds of stimuli. I completely disagree with your point here and the people buying Gucci/LV are a drop in the bucket compared to, say, Wal-Mart's yearly wage theft statistics.
There is no simple means of identifying who is in need and if people get the help who don't need it they can redistribute it if they are morally inclined or do hoarding or w/e; who cares?
The dot-com bust produced an EXTREMELY mild recession (so mild that it was often misattributed to 9/11, which occurred when it was almost over.
OTOH, there was a lot of pain iny the subsequent expansion leading up to the 2008 , but that was all the fault of fiscal (eepecially tax) policy of the Bush Administration and thei Congressional allies, not Fed monetary policy. While Greenspan clearly ideologically supported the people doing that, it wasn't him and the Fed causing the problems.
It was "mild" because they rolled the would-be losses into high-risk vehicles and strategies that eventually created the GFC, which included Fed policy to juice asset markets. The Dotcom bubble was the rolling over of the Reagan/Papa Bush-era savings and loan crisis (Greenspan was involved in that, too), and (tinfoil hats on now) a massive bond market liquidity crisis preceded the COVID pandemic flash crash and emergency liquidity injections/stimulus/PPP by a scant few months (and was quietly swept under the rug).
We deserve what we get if we don't act on the obvious pattern, at this point. We've spent half a century throwing the public under the bus just so that a few oligarchs don't have to pay out for their bad bets, and Greenspan was absolutely their man for a significant portion of that campaign in the class wars.
I think that this was relatively not known as a major risk far in advance otherwise more traders would have gotten rich. Michael Burry only started to short the market in late 2005, four months before Greenspan's term ended.
It is hard to ask Greenspan to have super natural powers of foresight beyond just about everyone else.
https://youtu.be/mqicZN7wHtU is the final bit from the Big Short where Mark Baum is to speak before the "legendary, former chairman of the Fed Alan Greenspan" at a financial conference in 2008.
It described the dotcom bubble, but I seem to recall people were applying it to the 2000s housing market too. Tldr it was not a totally uncommon opinion during either of these bubbles to say there was a bubble going on.
> It is hard to ask Greenspan to have super natural powers of foresight beyond just about everyone else.
From a person in his position the baseline is "more foresight than just about everyone else". That's why they get the big bucks.
If you build something grand on wooden legs and massive debt for the next guy to deal with, or drive into a failure mode even if that's not super obvious, it's not high praise.
Alan Greenspan acquired too much power and went out of his way to railroad regulators. It was a classic "absolute power corrupts absolutely" and his flooding the markets with dollar liquidity at every crisis completely destroyed any concepts of moral hazard, of which we are still living with the consequences to this day.
He set the stage for the financial crisis that started crumbling a year after he left the fed chair. It wasn't all his fault (politicians lost any spine and bankers any sense), but he was the conductor.
He was a believer in the idea that banks would never act against their own long term interests in order to make money quickly because that would be an existential crisis for the bank.
Shortly after he left a bank with over 150 years of history collapsed due to exactly that sort of mismanagement, triggering a crisis for the entire banking sector.
And when production for a system I built burns down the month after I leave my job, the next guy they hire was actually the culprit! Greenspan was seen as responsible for the dot-com bust as well which was solidly in the center of his tenure.
The new IT manager walks into his office. He sits down and goes through his desk and finds three envelopes with the numbers 1, 2, and 3 on them with the attached letter:
A short few months later there was a significant production outage. Things wouldn't work and management was getting angry. After a long day of angry meetings he went to his desk and opened the first letter. It read "Blame it on your predecessor."
The next day in the meetings he blamed it on his predecessor and told of all the things that weren't done right... routine patching left undone, documentation in disarray. Upper management grumbled but agreed to give him the time to fix it.
Two years later there was another outage. This one went on for a day or two and management was once again getting angry about things and so he went to his desk and pulled out the second letter. "Blame it on the hardware."
With that, he went in pointing out that they were years behind on keeping the hardware itself up to date. Upper management grumbled again but agreed to a budget that allowed him to update the hardware.
For a while, everything was smooth and then it hit... another outage. He went to his desk and opened the third letter. "Prepare three envelopes."
There was a stimulus check that went out around that time. I felt it insane that I was receiving a check when nobody in my life was negatively impacted, the economy didn’t seem hurt (no more then when you’re up then down at a blackjack table), it was just a rebalancing of people’s portfolios values. Turns out that started the wave of completely untargeted stimulus/aide that would come at every economic faltering. I wish we would at least try to identify who is in need during these times. It drives me crazy when I would see the lines at Gucci and LV type stores backed up every week a Covid check went out.
TLDR - Why make it harder for people to get help on the basis that some people might get help who don't deserve it?
means testing kills the usefulness of these kinds of stimuli. I completely disagree with your point here and the people buying Gucci/LV are a drop in the bucket compared to, say, Wal-Mart's yearly wage theft statistics.
There is no simple means of identifying who is in need and if people get the help who don't need it they can redistribute it if they are morally inclined or do hoarding or w/e; who cares?
8 replies →
The dot-com bust produced an EXTREMELY mild recession (so mild that it was often misattributed to 9/11, which occurred when it was almost over.
OTOH, there was a lot of pain iny the subsequent expansion leading up to the 2008 , but that was all the fault of fiscal (eepecially tax) policy of the Bush Administration and thei Congressional allies, not Fed monetary policy. While Greenspan clearly ideologically supported the people doing that, it wasn't him and the Fed causing the problems.
It was "mild" because they rolled the would-be losses into high-risk vehicles and strategies that eventually created the GFC, which included Fed policy to juice asset markets. The Dotcom bubble was the rolling over of the Reagan/Papa Bush-era savings and loan crisis (Greenspan was involved in that, too), and (tinfoil hats on now) a massive bond market liquidity crisis preceded the COVID pandemic flash crash and emergency liquidity injections/stimulus/PPP by a scant few months (and was quietly swept under the rug).
We deserve what we get if we don't act on the obvious pattern, at this point. We've spent half a century throwing the public under the bus just so that a few oligarchs don't have to pay out for their bad bets, and Greenspan was absolutely their man for a significant portion of that campaign in the class wars.
I think that this was relatively not known as a major risk far in advance otherwise more traders would have gotten rich. Michael Burry only started to short the market in late 2005, four months before Greenspan's term ended.
It is hard to ask Greenspan to have super natural powers of foresight beyond just about everyone else.
https://youtu.be/mqicZN7wHtU is the final bit from the Big Short where Mark Baum is to speak before the "legendary, former chairman of the Fed Alan Greenspan" at a financial conference in 2008.
This phrase was very popular for a good many years, popularized by Greenspan iirc: https://en.wikipedia.org/wiki/Irrational_exuberance
It described the dotcom bubble, but I seem to recall people were applying it to the 2000s housing market too. Tldr it was not a totally uncommon opinion during either of these bubbles to say there was a bubble going on.
> It is hard to ask Greenspan to have super natural powers of foresight beyond just about everyone else.
From a person in his position the baseline is "more foresight than just about everyone else". That's why they get the big bucks.
If you build something grand on wooden legs and massive debt for the next guy to deal with, or drive into a failure mode even if that's not super obvious, it's not high praise.
hmm, an argument against expertise is not something i expect to see often on hackernews :)