Alan Greenspan will go down in history as the person who has done more damage to the U.S. economy and society that anyone who was not a foreign enemy. In fact the destruction he wreaked through his incompetence would also exceed the damage caused by almost all would-be enemies as well.
Greenspan accomplished the remarkable feat as Fed chair of ignoring the growth of the $8 trillion housing bubble. This bubble could not have been easier to see if it had been 500 feet high and lit up with huge neon signs saying “Huge Housing Bubble.” But Greenspan insisted the bubble was not there.
And Greenspan somehow didn’t recognize that the collapse of this massive bubble would devastate the economy. The bubble was generating over $1 trillion in annual demand through its direct impact on housing construction and its indirect impact on consumption through the housing wealth effect. This demand would inevitably disappear when the bubble burst, leaving a huge hole in demand.
Did Greenspan think that the private sector had some magic formula to replace this demand? What could he have been thinking or smoking?
If we had a political debate that was driven by evidence, where the accuracy of one’s past judgements played any role in the credibility granted their current opinion, then Greenspan would be relegated to the role of ranting fool. His opinions on the economy would be given slightly less credibility than the mumblings of a street drunk.
This is why it would have been worth highlighting the news contained in a NYT article on the origins of the “Campaign to Fix the Debt,” the corporate financed effort to reduce the deficit. The article tells readers in passing:
“The Campaign to Fix the Debt started to come together at a salon dinner held in the backyard of Senator Mark Warner, Democrat of Virginia, in the fall of 2011. An influential group of economic, political and business leaders — including the former Federal Reserve chairman Alan Greenspan and Mark Bertolini, the chief executive of the Aetna insurance company — huddled in a too-small tent in the pouring rain.”
This is such an amazing tidbit that it really should have been the lead of the article. The person most responsible for wrecking the economy — and incidentially adding trillions of dollars to the debt — was there at the founding of the Campaign to Fix the Debt.
Wow, what did Santa get you for Christmas?