<< Why does everybody like to bash Mr. G.?>>
Assuming this is a serious question, the problems with Greenspan go back 2+ years. An important contributory factor for sudden economic slowdown last fall was 1) the prior 175 bps increases, the last of which was 50 bps last May -- even after the 40 % market correction of Nasdaq had taken place. I don't think it was a coincidence that cap ex, order/inventory imbalance got hammered 6 months later. That 50 I believe was the nail in coffin.
2) Greenspan was supposedly fighting a totally imaginable phantom -- inflation. Personally, I believe he had 'asset inflation' more in his sights and couldn't trust the market to do its own correcting. Or, as an alternative, why not alter margin requirements -- that would have been a better way to check some of the speculative excess that clearly was present.
3) In addition, I believe he totally blew it regarding the sustained drain of continued high energy costs, which I saw described as basically a world-wide tax of some 600 to 700 billion dollars last year.
4) Then when evidence was mounting last fall of signif. slowdown -- just because the FOMC had never done it before -- he refused to go from RATE INCREASE bias to an actual cut. The NAZ tanked 300 points.
5) He had the opportunity for an intermeeting cut in Feb. which I think would have helped with a more orderly transition. Unfortunately, this kind of bloodbath since the end of Jan. -- now spread to S & P and then to the Dow -- may really take a long time to repair and have very far reaching repercussions not only on the wealth effect, consumer confidence, consumer spending (2/3 of GDP), further impact on business,etc. mushrooming and escalating. Cap. gains revenues will also take enormous hit.
Greenspan and FOMC motto: ' Wait too long, then do too much.' He missed the boat in 90-91, too. Did the same thing.
He should have let the market do its repair of "asset inflation" and not precipitate a recession to do so.
And we see now this has the potential to spread world wide. What a shame.
Unless he does something unexpected and remarkable -- and I don't think he will as he seems to refuse to consider at any time that FOMC policy is in error -- I really believe the general good standing he enjoyed will be permanently tarnished.
My vote is to get rid of him. Unfortunately, at this point, I think even that's too late for the carnage already caused. |
