Greenspan defends himself on '90s bubble

[Tom Yossarian Joad]

WASHINGTON - Federal Reserve Chairman Alan Greenspan defended himself Saturday against a criticism of his tenure, saying policy-makers would have damaged the economy in the late 1990s had they tried to burst that era's speculative stock market bubble.

"The notion that a well-timed incremental tightening could have been calibrated to prevent the late 1990s bubble while preserving economic stability is almost surely an illusion," Greenspan said in a speech to the American Economic Association's annual meeting in San Diego. A copy of his remarks was distributed in Washington.

Greenspan previously has defended the Fed's handling of the high-flying stock market late in the Clinton administration. In Saturday's speech, he said the Fed correctly focused policies on trying to mitigate probable damage from the eventual bursting of the bubble of stock market speculation.

"There appears to be enough evidence, at least tentatively, to conclude that our strategy of addressing the bubble's consequences, rather than the bubble itself, has been successful," Greenspan said. "Despite the stock market plunge, terrorist attacks, corporate scandals and wars in Afghanistan and Iraq, we experienced an exceptionally mild recession" in 2001.

more: http://www.miami.com/mld/miamiherald/business/7627069.htm

[54anickel]

1. Interesting policy, isn't it. Reactive vs proactive. Doesn't give me

any warm fuzzy feeling about the collapse of the dollar.
If his monetary policy entails simply letting the economy do what it has to do and simply manage by being ready to deal with the effects and just "let it happen", we may have some hard times ahead.

[ozymandius]

5. Exactly. Greenspan has been nothing but a bubble manager.

He coddles extremes. We have gone from "overheating" the economy to fears of massive depression-like deflation in less than five years. That speaks, to me, of gross mismanagement.

[revcarol]

2. Greenspan has been touted so often as being the greatest thing

since sliced bread that I get sick everytime he opens his mouth.

Whe he talked about "irrationl exhuberance, my first thought was,"What are they going to DO about it?"

Answer: "NUTHIN'"

I hope our next President has some COMMON SENSE that you don't let serious problems just slide.

The start of foreign investors no longer investing $$ in the U. S. because they saw the game was rigged against investors.

[Gin]

3. the bubble burst for many reasons....fraud and theft were 2 of them...

also he raised interest rates when things were moving along smoothly, many times in a short period of time.

I thought he was a wizard about these things...but now I think...he's guessing.

The big difference is...he has the power to screw things up by raising interest rates.

but what do I know??? Ima ordinary person...not a financial wiz.

[ozone_man]

6. No, the bubble was unsustainable.

It had to burst and never should have been allowed to grow so large. It should have been pricked back in 1996, when it was already recognized by Greenspahn.

I think he will go down in history as a failure, but he sure was riding high for a long time. He allowed this to happen and now the worthless dollar is his baby.

[Neutrino]

4. I hope the next President (Howard Dean) will put together

an Administration that at least has their own teeth. The Bush Administration is riddled with left overs from the last Century. Old ideas-- trying to model the old British Empire, in an era that hungers for New Ideas and fresh insights that will move America forward.

[Yavin4]

7. Greenspan Is Shameless Republican Hack

He has politicized monetary. He raised rates all throughout Clinton's tenure, but he's kept them artificially low throughout Bush II's tenure.

When history looks back on the Great Collapse of 2006, Greenspan will be the villain. His low interest rate policy created a huge debt bubble that will destroy this economy. All of these positive reports that you're hearing about is built on a foundation of record cheap debt. Once that debt gets just a little bit more expensive, BAM!, collapse.

[alcuno]

10. He should have been loosening in 2000, but he was working for *.

And what on earth does war in Iraq added to corporate scandals have to do with the 2001 recession? Those occured AFTER the recession's official end in December of 2001.

[wunnerfulrobin]

12. the reason for the rate increase in the 90s

was to slow the supposed inflation. but he should have stopped at the end of 99. I went nuts as he raised the rates well into 2000. As for now, rates arent "artificially low", they are right about where they should be without much inflation. There is no reason to raise rates unless things get overheated, which probably wont happen. I know a few people who were able to buy homes last yr because of the low rates; i re-fied mine for 5%, a friend got 4.5! ALAN, LEAVE THE RATES ALONE!

[stevebreeze]

8. interest rates are not the only tool Greenspans has

He could have raised margin requirements. Of course he did no such thing. Hack!

[snippy]

9. You are right. An increase in margin requirements would have been

absolutely the right thing to do. Even if the increase affected a relatively small number of accounts directly, the message would have been sent and brokers would have tightened requirements on a lot more accounts than just those directly affected.

This article includes some additional republican Bushshit about the recession being so mild. This is true only if you ignore the fact that we are in the 10th quarter of the recovery, the first 8 of which were anemic at best.

[54anickel]

11. I am afraid the dollars days as the world's reserve currency are coming

to an end. There are more trade zones being created, the Euro is no no less riskier than the dollar. Once they get the details worked on the EU constitution, the Euro will look pretty good.

And let's not forget about Asia, and now India seems to be part of the "Asian Century" trade region.

http://www.business-standard.com/today/story.asp?Menu=26&story=31242