You're a Sly One, Mr. Greenspan
Friday, Dec. 14 2007
Susan Walker
FOXBusiness
NEW YORK -- Christmas is in the air, and with it come the Scrooges and Grinches of the world to try to spoil everyone's holiday spirit. Here's a tribute to the Grinch Who Stole the Economy: Alan Greenspan, who wrote that the credit crisis was an "accident waiting to happen" in a commentary piece this week (December 12, 2007) for the Wall Street Journal.
The Grinchspan Song
(with apologies to Dr. Seuss)
You're a sly one, Mr. G.
You really are a heel
You told us all to get a great mortgage deal
And then laughed as we slipped on that banana peel.
You're really quite a meanie, Mr. Greenie.
You're a rotter, Mr. G.
Without a spotter of kindness.
First you say you couldn't have guessed
That freer credit would create such a mess.
Now today you say
It was an "accident waiting to happen."
You can't have it both ways, Mr. 'Span.
You're as charming as an attack dog, Mr. G.
You're full of rotten eggnog
That you are.
Do you see a long hard slog
For the economy to get back in shape
Now that you've lost the Superman cape?
You're really quite a Grinch, Mr. G.
No, most of us aren't happy that the Grinch stole our economy. It used to be such a bright and healthy thing. Now, it looks swollen and bloated.
And we can't imagine that the current Fed chairman, Ben Bernanke, is any happier. He keeps seeing ghosts of the Grinchspan who stole the economy – words spoken from afar, like this interview on National Public Radio on December 14, when the former Fed head said that the housing meltdown was "inevitable in one sense: When you get a type of euphoria building in an economy, you're dealing with the innate aspects of human nature. And I've watched bubbles inflate and deflate for 60 years. I'm pretty much convinced that we will never be able, by monetary or fiscal policy or government actions, short of disabling the economy, (to undermine) those bubbles. Eventually, this has to defuse itself."
Analysts at Elliott Wave International have long pointed out that the Fed's moves actually follow the markets rather than move them, and they couldn't agree more with Greenspan's assessment:
"Credit spreads exploded again in November, in line with last month’s 'forecast for a record widening between low grade and high grade yields.' The sharp rise … illustrates very clearly that the worst of the credit crisis is far from over, as many market observers were contending just a month ago. The rise also shows the futility of believing that the Federal Reserve can relieve the credit crunch with rate cuts. As EWI has continually noted, liquidity is not something that the Fed can turn on and off like a water faucet. It is a function of psychology." The Elliott Wave Financial Forecast, December 2007
So if you are hoping along with much of Wall Street that the Fed can save the day and find the U.S. economy again, I've got news: the Fed can't change what's already playing out in the credit markets, because it doesn't have the right tools. And the banks that have dramatically slowed their lending know it best of all. They keep trying to tell the Fed that they don't want any more of the credit that it's selling.
To stay clear of Grinchlike behavior, you would do best not to get caught up in Fed-watching. It can affect the way you invest, which isn't healthy and might turn you into a mean old Grinch, too. After all, you wouldn't want your loved ones to feel this way about you (and I quote from the original Dr. Seuss lyrics):
You're a foul one, Mr. Grinch.
You're a nasty, wasty skunk.
Your heart is full of unwashed socks
Your soul is full of gunk.
Mr. Grinch.
The three words that best describe you, are as follows, and I quote:
"Stink, stank, stunk!"
Susan C. Walker writes for Elliott Wave International, a market forecasting and technical analysis company. She has been an associate editor with Inc. magazine, a newspaper writer and editor, an investor relations executive and a speechwriter for the Federal Reserve Bank of Atlanta. She is a graduate of Stanford University.
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