Greenspan had little to do with it. The markets blasted to orbit into the biggest market mania in history and there are several contributing factors, but Greenspan is not one of them.
Greed is a factor. Everyone wanted to make a buck and poured as much money as they could into the markets throwing all fundamentals out the window in hopes of stocks reaching astronomical levels when they were already priced beyond reason. Greenspan didn't force millions of people to keep buying and you can't blame him for the stupidity of the public.
The loose banking system was a factor. Banks are so eager to lend you money that they are willing to throw good money after bad and loose restrictions allowed everyone to push the limits of what they could do. How many credit card offers does one get in the mail? I get a dozen every week. How many second mortgage offers does one get in the mail? I get half a dozen every week. People went into debt up to their ears and put every ounce of extra money into the stock market. They took out loans, 2nd mortages, and extra credit cards and borrowed money to play th market. Then they went on margin on top of that. Greenspan didn''t force anyone to do that. And eventually when the extra money sources began to get tapped out, the markets began to fall. People took profits, margin calls were made, positions liquidated to make loan payments. It's a vicious cycle that hasn't seen an end yet. Greenspan had nothing to do with it. In fact, he has reduced rates by 9 times this year with no effect, and has kept the printing press going full speed, pumping an enormous amount of liquidity into the market, also with little effect. It's not a problem that Greenspan can fix, though he tried.
The screwed up accounting system of companies and their lies was a factor. Companies started reporting income in pro-forma format which is a load of crock. Before the mania, they reported one time extraordinary gains into the bottom line to make their earnings look better than they really were. Now that those gains are losses, they choose to exclude one time losses, once again to to boost the bottom line and make the earnings look better than they really are. The public was tricked and Greenspan had nothing to do with it as he doesn't set the accounting rules nor does he govern over the SEC.
The lies of Wall Street were a factor. Think of all those analysts that put absurd price targets on stocks based on a pie in the sky scenario that was never met.Think of all those Wall Street gurus, who are supposed to be knowledgable and wise about the market, yet came out and kept saying buy, buy, buy. They damn well knew P/E's and values were high. It's their business. Think of how many sell ratings were given near the market's high. none. Think of how many sell ratings were given in the last few months. Very few and most have come after a stock has already fallen 90% off the peak. Duh....Greenspan had nothing to do with it.
Across the net, I often see people blame Greenspan for the economy, yet I never see any valid reasons why. |
