Only an idiot would try to blame Greenspan for all of this.
To claim that the collapse of the stock market caused the 2001 recession is ridiculous. Its just not true.
I don't agree with the current weak dollar approach which I'm sure in part is politically motivated, but here's the real explanation:
In the late 1920s the world had a similar prosperity/equity bubble. Greenspan knew that the 1930s Government fiscal policy during those times make the economic collapse even worse. So he knew he had to take a different approach. Will he succeed ? Who knows ? But he's giving it his best shot. If most of Greenspan's critics were in charge, we'd be in a deep depression with a protectionist trade war in progress and World War III around the corner.
His strategy was simple -- incentivise consumer demand IN THE FACE OF INCREASING UNEMPLOYMENT -- until the excess capacity created during the economic boom works its way out of the system.
He did this by lowering interest rates, causing home purchases to be temporarily more affordable, and motivating people to refinance and take some equity out of their homes and of course, people being people, used this money to purchase stuff, lol.
Consumer demand would keep a majority of businesses afloat, minimize layoffs, while weaker businesses go under and their assets are absorbed by competition or are redistributed in some other way.
With weaker businesses gone, there is less competition, so there is less cut throat pricing, and a source of economy crippling deflation is eliminated.
Since one of our major sources of deflation is cheap goods from overseas, why not lower the dollar causing overseas good to cost more, until US businesses we get their act together ?
Do I think it will work ? Wellll I don't know -- but I started buying gold stocks about 18 months ago ..... lol.
Greenspan didn't really have too many options available to him. Oh yeah -- Sept 11th, 2001 and our very expensive response didn't help him out either.
So give him a break. He's not the problem. Greedy stupid businessmen/bankers and the "buy now pay later -- or never" public are. Osama bin Laden has also cost us a few hundred billion buck too.
Chris |
