Alan Greenspan

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Panderer to Power by Frederick Sheehan

Alan Greenspan, Asian financial crisis, asset-backed security, bank run, banking crisis, Bear Stearns, book value, Bretton Woods, British Empire, business cycle, buy and hold, California energy crisis, call centre, central bank independence, collateralized debt obligation, corporate governance, credit crunch, Credit Default Swap, credit default swaps / collateralized debt obligations, crony capitalism, deindustrialization, diversification, financial deregulation, financial innovation, full employment, Glass-Steagall Act, Greenspan put, guns versus butter model, inflation targeting, interest rate swap, inventory management, Isaac Newton, John Meriwether, junk bonds, low interest rates, margin call, market bubble, Mary Meeker, McMansion, Menlo Park, Michael Milken, money market fund, mortgage debt, Myron Scholes, new economy, Nixon triggered the end of the Bretton Woods system, Norman Mailer, Northern Rock, oil shock, Paul Samuelson, place-making, Ponzi scheme, price stability, reserve currency, rising living standards, Robert Solow, rolodex, Ronald Reagan, Sand Hill Road, Savings and loan crisis, savings glut, shareholder value, Silicon Valley, Silicon Valley startup, South Sea Bubble, stock buybacks, stocks for the long run, supply-chain management, supply-chain management software, The Great Moderation, too big to fail, transaction costs, trickle-down economics, VA Linux, Y2K, Yom Kippur War, zero-sum game

Greenspan’s Forays into Publicity and Publishing Alan Greenspan had been born into the dark side of prosperity. The stock market boom of the 1950s was changing the way Americans behaved, and Greenspan did not approve. The New York Times reported Alan Greenspan’s discourse at an economic conference in December 1959: 23 Sumner Slichter, “Five Trends Shape the Business Future,” Nation’s Business, February 1957, p. 96. 24 Bremner, Chairman of the Fed, p. 128. 25 Albert Jay Nock, Memoirs of a Superfluous Man (New York and London: Harper and Brothers, 1943), p. 256. 26 Bremner, Chairman of the Fed, p. 128. Alan Greenspan, of Townsend, Greenspan & Co., New York financial house, presented the view that a break in stock market trends was not just a harbinger of boom or recession, as is commonly held, but a crucial factor in causing a boom or a recession.

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Yet it was soon after this tirade against welfare statists that Greenspan changed course—he aimed his efforts toward Washington. 40 Ayn Rand, Capitalism: The Unknown Ideal, Signet (paperback) 1967, essay by Alan Greenspan: “Gold and Economic Freedom” pp. 96–101 41 Bremner, Chairman of the Fed, pp. 204, 224. This page intentionally left blank 3 Advising Nixon: “I Could Have a Real Effect” 1967–1973 How Alan Greenspan, a man who believed in the philosophy of little government interference and few rules or regulations, could end up becoming chairman of the greatest regulatory agency in the country is beyond me. —Barbara Walters, 20081 Alan Greenspan entered politics during the 1968 Nixon election campaign. By different accounts, this decision was influenced by at least two old friends.

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To an extent, borrowed funds went into the stock market and other speculative activities. This was the period when Alan Greenspan became a household term (term, since “Alan Greenspan” seemed as much a thing as a person). It was also the period when credit decisions beyond bank lending—such as securitizing subprime assets—further reduced the influence of the Fed (should it wish to restrain the economy). Bailing Out Mexico—With an Eye to Greenspan’s 1996 Reelection The bailout of a foreign country is a political decision made by Congress and the executive branch of the government, which is not a topic for this book. However, Alan Greenspan’s insertion of the Federal Reserve requires an abbreviated peso detour.

The Man Who Knew: The Life and Times of Alan Greenspan by Sebastian Mallaby

airline deregulation, airport security, Alan Greenspan, Alvin Toffler, Andrei Shleifer, anti-communist, Asian financial crisis, balance sheet recession, bank run, barriers to entry, Bear Stearns, behavioural economics, Benoit Mandelbrot, Black Monday: stock market crash in 1987, bond market vigilante , book value, Bretton Woods, business cycle, central bank independence, centralized clearinghouse, classic study, collateralized debt obligation, conceptual framework, corporate governance, correlation does not imply causation, credit crunch, Credit Default Swap, credit default swaps / collateralized debt obligations, currency peg, Dr. Strangelove, energy security, equity premium, fiat currency, financial deregulation, financial engineering, financial innovation, fixed income, Flash crash, forward guidance, full employment, Future Shock, Glass-Steagall Act, Greenspan put, Hyman Minsky, inflation targeting, information asymmetry, interest rate swap, inventory management, invisible hand, James Carville said: "I would like to be reincarnated as the bond market. You can intimidate everybody.", junk bonds, Kenneth Rogoff, Kickstarter, Kitchen Debate, laissez-faire capitalism, Lewis Mumford, Long Term Capital Management, low interest rates, low skilled workers, market bubble, market clearing, Martin Wolf, Money creation, money market fund, moral hazard, mortgage debt, Myron Scholes, Neil Armstrong, new economy, Nixon shock, Nixon triggered the end of the Bretton Woods system, Northern Rock, paper trading, paradox of thrift, Paul Samuelson, Phillips curve, plutocrats, popular capitalism, price stability, RAND corporation, Reminiscences of a Stock Operator, rent-seeking, Robert Shiller, Robert Solow, rolodex, Ronald Reagan, Saturday Night Live, Savings and loan crisis, savings glut, secular stagnation, short selling, stock buybacks, subprime mortgage crisis, The Great Moderation, the payments system, The Wealth of Nations by Adam Smith, Tipper Gore, too big to fail, trade liberalization, unorthodox policies, upwardly mobile, We are all Keynesians now, WikiLeaks, women in the workforce, Y2K, yield curve, zero-sum game

., “Inauguration: Establishment Crowd a Day of Citywide Celebrating,” Washington Post, January 20, 1977. 103. Pullen, interview by the author, October 15, 2012. 104. Alan Greenspan to Frank Zarb, memorandum, December 13, 1975, personal files of Alan Greenspan. 105. Alan Greenspan to Nathan Haywood, memorandum, December 24, 1975, personal files of Alan Greenspan. 106. Alan Greenspan to James M. Cannon, memorandum, April 6, 1976, personal files of Alan Greenspan. 107. Fearing systemic fallout from the untested municipal bankruptcy option, state governments rescued cities such as Chicago, Boston, Camden, Harrisburg, and Detroit; in effect, the new bankruptcy option became a threat used by cities to snag the bailouts it was designed to prevent.

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Oval Office, Conversation 640-6, December 22, 1971, White House tapes, Richard Nixon Presidential Library and Museum. 55. Alan Greenspan, presentation, American Finance Association, New Orleans, December 28, 1971. 56. Alan Greenspan to Milton Friedman, letter, October 2, 1972. 57. Milton Friedman to Alan Greenspan, letter, October 10, 1972. 58. Alan Greenspan, “The Mirage of Wage-Price Controls,” Wall Street Journal, April 30, 1973. This op-ed column was a précis of an address to the American Statistical Association. 59. Alan Greenspan, “Do-Nothingism,” New York Times, July 31, 1973. 60. “Business Outlook: Inflation: The Longer View” (New York: Townsend-Greenspan & Company, January 23, 1974), personal files of Kathryn Eickhoff; and “Business Outlook” (New York: Townsend-Greenspan & Company, January 28, 1974), personal files of Kathryn Eickhoff. 61.

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See also Nessen, Making the News, Taking the News: From NBC to the Ford White House, 151–52. 49. Alan Greenspan to William E. Simon, memorandum, January 15, 1975, personal files of Alan Greenspan. 50. Alan Greenspan to Economic Policy Board, memorandum, January 12, 1975, personal files of Alan Greenspan. 51. Murray Seeger, “Has No Faith in Ford or Congress: AFL-CIO to Plan Own Recession War,” Los Angeles Times, January 22, 1975. The quotation is also excerpted in a collection of quotes from Meany in Alan Greenspan’s personal files. 52. The critic was Walter Fackler of the University of Chicago.

Extreme Money: Masters of the Universe and the Cult of Risk by Satyajit Das

"RICO laws" OR "Racketeer Influenced and Corrupt Organizations", "there is no alternative" (TINA), "World Economic Forum" Davos, affirmative action, Alan Greenspan, Albert Einstein, algorithmic trading, Andy Kessler, AOL-Time Warner, Asian financial crisis, asset allocation, asset-backed security, bank run, banking crisis, banks create money, Basel III, Bear Stearns, behavioural economics, Benoit Mandelbrot, Berlin Wall, Bernie Madoff, Big bang: deregulation of the City of London, Black Swan, Bonfire of the Vanities, bonus culture, book value, Bretton Woods, BRICs, British Empire, business cycle, buy the rumour, sell the news, capital asset pricing model, carbon credits, Carl Icahn, Carmen Reinhart, carried interest, Celtic Tiger, clean water, cognitive dissonance, collapse of Lehman Brothers, collateralized debt obligation, corporate governance, corporate raider, creative destruction, credit crunch, Credit Default Swap, credit default swaps / collateralized debt obligations, currency risk, Daniel Kahneman / Amos Tversky, deal flow, debt deflation, Deng Xiaoping, deskilling, discrete time, diversification, diversified portfolio, Doomsday Clock, Dr. Strangelove, Dutch auction, Edward Thorp, Emanuel Derman, en.wikipedia.org, Eugene Fama: efficient market hypothesis, eurozone crisis, Everybody Ought to Be Rich, Fall of the Berlin Wall, financial engineering, financial independence, financial innovation, financial thriller, fixed income, foreign exchange controls, full employment, Glass-Steagall Act, global reserve currency, Goldman Sachs: Vampire Squid, Goodhart's law, Gordon Gekko, greed is good, Greenspan put, happiness index / gross national happiness, haute cuisine, Herman Kahn, high net worth, Hyman Minsky, index fund, information asymmetry, interest rate swap, invention of the wheel, invisible hand, Isaac Newton, James Carville said: "I would like to be reincarnated as the bond market. You can intimidate everybody.", job automation, Johann Wolfgang von Goethe, John Bogle, John Meriwether, joint-stock company, Jones Act, Joseph Schumpeter, junk bonds, Kenneth Arrow, Kenneth Rogoff, Kevin Kelly, laissez-faire capitalism, load shedding, locking in a profit, Long Term Capital Management, Louis Bachelier, low interest rates, margin call, market bubble, market fundamentalism, Market Wizards by Jack D. Schwager, Marshall McLuhan, Martin Wolf, mega-rich, merger arbitrage, Michael Milken, Mikhail Gorbachev, Milgram experiment, military-industrial complex, Minsky moment, money market fund, Mont Pelerin Society, moral hazard, mortgage debt, mortgage tax deduction, mutually assured destruction, Myron Scholes, Naomi Klein, National Debt Clock, negative equity, NetJets, Network effects, new economy, Nick Leeson, Nixon shock, Northern Rock, nuclear winter, oil shock, Own Your Own Home, Paul Samuelson, pets.com, Philip Mirowski, Phillips curve, planned obsolescence, plutocrats, Ponzi scheme, price anchoring, price stability, profit maximization, proprietary trading, public intellectual, quantitative easing, quantitative trading / quantitative finance, Ralph Nader, RAND corporation, random walk, Ray Kurzweil, regulatory arbitrage, Reminiscences of a Stock Operator, rent control, rent-seeking, reserve currency, Richard Feynman, Richard Thaler, Right to Buy, risk free rate, risk-adjusted returns, risk/return, road to serfdom, Robert Shiller, Rod Stewart played at Stephen Schwarzman birthday party, rolodex, Ronald Reagan, Ronald Reagan: Tear down this wall, Satyajit Das, savings glut, shareholder value, Sharpe ratio, short selling, short squeeze, Silicon Valley, six sigma, Slavoj Žižek, South Sea Bubble, special economic zone, statistical model, Stephen Hawking, Steve Jobs, stock buybacks, survivorship bias, tail risk, Teledyne, The Chicago School, The Great Moderation, the market place, the medium is the message, The Myth of the Rational Market, The Nature of the Firm, the new new thing, The Predators' Ball, The Theory of the Leisure Class by Thorstein Veblen, The Wealth of Nations by Adam Smith, Thorstein Veblen, too big to fail, trickle-down economics, Turing test, two and twenty, Upton Sinclair, value at risk, Yogi Berra, zero-coupon bond, zero-sum game

Philip Augar (2009) Chasing Alpha: How Reckless Growth and Unchecked Ambition Ruined the City’s Golden Decade, Bodley Head, London: 47. 4. Alan Greenspan (2008) The Age of Turbulence: Adventures in a New World, Penguin Books, London: 256, 257. 5. Peter S. Goodman “Taking a hard new look: a Greenspan legacy” (8 October 2008) New York Times. 6. “The Turner Review: A regulatory response to the global banking crisis” (March 2009), Financial Services Authority: 49. 7. Alan Greenspan “Banking in the global marketplace” (18 November 1996), Speech to Federation of Bankers Association of Japan, Tokyo. 8. Greenspan, The Age of Turbulence: 360. 9. Alan Greenspan “Do efficient financial markets mitigate financial crises?”

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Companies aggressively reduced their cost of capital by substituting cheaper debt for expensive equity. Alan Greenspan, chairman of the Federal Reserve, supported the rush to debt: “Rising leverage appears to be the result of massive improvements in technology and infrastructure...experience...has made me reluctant to underestimate the ability of most households and companies to manage their financial affairs.”13 Companies used cash flow from operations or new borrowings to repurchase their own shares to boost their stock price. Alan Greenspan put the practice down to a slowdown in innovation and excess capital.14 Stock buybacks left the company with more debt and a weaker financial position.15 In 1987 Standard Oil of Ohio (Sohio), once part of the grand dame of oil companies but now owned by Britain’s BP, advertised in leading financial magazines—“Standard Oil not standard thinking.”16 An arty graphic depicted a drop of oil in which a reflection of an oil well was visible.

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Quoted in Rebecca Solnit (2000) Wanderlust: A History of Walking, Penguin Books, New York: 256. 10. Adam Smith (2007) Wealth of Nations, Cosimo, New York: 113. 11. Alan Greenspan (2007) The Age of Turbulence: Adventures in a New World, Allen Lane, London: 230. 12. Jo Becker, Sheryl Gay Stolberg and Stephen Labaton “The reckoning—White House philosophy stoked mortgage bonfire” (20 December 2008) New York Times. 13. Ben Bernanke “Modern risk management and banking supervision” (12 June 2006), Remarks at the Stonier Graduate School of Banking, Washington. 14. Alan Greenspan “Understanding household debt obligations” (23 February 2004), Address to Credit Union National Association 2004 Governmental Affairs Conference, Washington DC. 15.

13 Bankers: The Wall Street Takeover and the Next Financial Meltdown by Simon Johnson, James Kwak

Alan Greenspan, American ideology, Andrei Shleifer, Asian financial crisis, asset-backed security, bank run, banking crisis, Bear Stearns, Bernie Madoff, Black Monday: stock market crash in 1987, Bonfire of the Vanities, bonus culture, book value, break the buck, business cycle, business logic, buy and hold, capital controls, Carmen Reinhart, central bank independence, Charles Lindbergh, collapse of Lehman Brothers, collateralized debt obligation, commoditize, corporate governance, corporate raider, Credit Default Swap, credit default swaps / collateralized debt obligations, crony capitalism, currency risk, Edward Glaeser, Eugene Fama: efficient market hypothesis, financial deregulation, financial engineering, financial innovation, financial intermediation, financial repression, fixed income, George Akerlof, Glass-Steagall Act, Gordon Gekko, greed is good, Greenspan put, Home mortgage interest deduction, Hyman Minsky, income per capita, information asymmetry, interest rate derivative, interest rate swap, junk bonds, Kenneth Rogoff, laissez-faire capitalism, late fees, light touch regulation, Long Term Capital Management, low interest rates, market bubble, market fundamentalism, Martin Wolf, Michael Milken, money market fund, moral hazard, mortgage tax deduction, Myron Scholes, Paul Samuelson, Ponzi scheme, price stability, profit maximization, proprietary trading, race to the bottom, regulatory arbitrage, rent-seeking, Robert Bork, Robert Shiller, Ronald Reagan, Saturday Night Live, Satyajit Das, Savings and loan crisis, sovereign wealth fund, Tax Reform Act of 1986, The Myth of the Rational Market, too big to fail, transaction costs, Tyler Cowen, value at risk, yield curve

Census Bureau, Income, Poverty, and Health Insurance Coverage in the United States: 2008, Table A-1, available at http://www.census.gov/prod/2009pubs/p60–236.pdf. 34. Alan Greenspan, The Age of Turbulence: Adventures in a New World (New York: Penguin, 2007), 51–53, 208. 35. Alan Greenspan (lecture, Annual Conference of the Association of Private Enterprise Education, April 12, 1997), available at http://www.federalreserve.gov/boarddocs/speeches/1997/19970412.htm. 36. Alan Greenspan (lecture, American Enterprise Institute, December 5, 1996), available at http://www.federalreserve.gov/boarddocs/speeches/1996/19961205.htm. 37. Alan Greenspan, Age of Turbulence, supra note 34, at 52. 38. Reported in Edsall, “Alan Greenspan,” supra note 1. See also Goodman, “Taking Hard New Look at a Greenspan Legacy,” supra note 1. 39.

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Tarullo, “Confronting Too Big to Fail” (lecture, Exchequer Club, Washington, D.C., October 21, 2009), available at http://www.federalreserve.gov/newsevents/speech/tarullo20091021a.htm. CHAPTER 4: “GREED IS GOOD” 1. Reported in Thomas B. Edsall, “Alan Greenspan: The Oracle or the Master of Disaster?” The Huffington Post, February 19, 2009, available at http://www.huffingtonpost.com/2009/02/19/alan-greenspan-the-oracle_n_168168.html. A shorter version of the quotation was reported in Peter S. Goodman, “Taking Hard New Look at a Greenspan Legacy,” The New York Times, October 8, 2008, available at http://www.nytimes.com/2008/10/09/business/economy/09greenspan .html. 2.

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We may have the most advanced political system in the world, but we also have its most advanced oligarchy. In 1998, the United States was in the seventh year of an economic boom. Inflation was holding steady between 2 and 3 percent, kept down by the twin forces of technology and globalization. Alan Greenspan, probably the most respected economist in the world, thought the latest technology revolution would allow sustained economic growth with low inflation: “Computer and telecommunication based technologies are truly revolutionizing the way we produce goods and services. This has imparted a substantially increased degree of flexibility into the workplace, which in conjunction with just-in-time inventory strategies and increased availability of products from around the world, has kept costs in check through increased productivity.”8 Prospects for the American economy had rarely seemed better.

How Markets Fail: The Logic of Economic Calamities by John Cassidy

Abraham Wald, Alan Greenspan, Albert Einstein, An Inconvenient Truth, Andrei Shleifer, anti-communist, AOL-Time Warner, asset allocation, asset-backed security, availability heuristic, bank run, banking crisis, Bear Stearns, behavioural economics, Benoit Mandelbrot, Berlin Wall, Bernie Madoff, Black Monday: stock market crash in 1987, Black-Scholes formula, Blythe Masters, book value, Bretton Woods, British Empire, business cycle, capital asset pricing model, carbon tax, Carl Icahn, centralized clearinghouse, collateralized debt obligation, Columbine, conceptual framework, Corn Laws, corporate raider, correlation coefficient, credit crunch, Credit Default Swap, credit default swaps / collateralized debt obligations, crony capitalism, Daniel Kahneman / Amos Tversky, debt deflation, different worldview, diversification, Elliott wave, Eugene Fama: efficient market hypothesis, financial deregulation, financial engineering, financial innovation, Financial Instability Hypothesis, financial intermediation, full employment, Garrett Hardin, George Akerlof, Glass-Steagall Act, global supply chain, Gunnar Myrdal, Haight Ashbury, hiring and firing, Hyman Minsky, income per capita, incomplete markets, index fund, information asymmetry, Intergovernmental Panel on Climate Change (IPCC), invisible hand, John Nash: game theory, John von Neumann, Joseph Schumpeter, junk bonds, Kenneth Arrow, Kickstarter, laissez-faire capitalism, Landlord’s Game, liquidity trap, London Interbank Offered Rate, Long Term Capital Management, Louis Bachelier, low interest rates, mandelbrot fractal, margin call, market bubble, market clearing, mental accounting, Mikhail Gorbachev, military-industrial complex, Minsky moment, money market fund, Mont Pelerin Society, moral hazard, mortgage debt, Myron Scholes, Naomi Klein, negative equity, Network effects, Nick Leeson, Nixon triggered the end of the Bretton Woods system, Northern Rock, paradox of thrift, Pareto efficiency, Paul Samuelson, Phillips curve, Ponzi scheme, precautionary principle, price discrimination, price stability, principal–agent problem, profit maximization, proprietary trading, quantitative trading / quantitative finance, race to the bottom, Ralph Nader, RAND corporation, random walk, Renaissance Technologies, rent control, Richard Thaler, risk tolerance, risk-adjusted returns, road to serfdom, Robert Shiller, Robert Solow, Ronald Coase, Ronald Reagan, Savings and loan crisis, shareholder value, short selling, Silicon Valley, South Sea Bubble, sovereign wealth fund, statistical model, subprime mortgage crisis, tail risk, Tax Reform Act of 1986, technology bubble, The Chicago School, The Great Moderation, The Market for Lemons, The Wealth of Nations by Adam Smith, too big to fail, Tragedy of the Commons, transaction costs, Two Sigma, unorthodox policies, value at risk, Vanguard fund, Vilfredo Pareto, wealth creators, zero-sum game

GREENSPAN SHRUGS 222 “a very small probability event”: Transcript of meeting of the Federal Reserve’s Open Market Committee, June 24, 2003. 226 “In the field of economics . . .”: Interview with the author, October 2008. 226 “brought down numerous . . .”: Alan Greenspan, “Economic Flexibility,” speech before the HM Treasury Enterprise Conference, London, England, January 26, 2004, available at http://federalreserve.gov/boarddocs/speeches/2004/20040126/default.htm. 228 “It turned out that he was . . .”: Quoted in John Cassidy, “The Fountainhead,” New Yorker, April 24, 2000, 172. 228 “She did things in . . .”: Quoted in ibid., 168. 229 “nothing more than . . .”: Alan Greenspan, “Antitrust” and “Gold and Economic Freedom,” in Ayn Rand, Capitalism: The Unknown Ideal (New York: Signet Books, 1967), 100. 229 “As Fed chairman . . .”: Greenspan, Age of Turbulence, 373. 229 “could undermine the competitiveness . . .”: Alan Greenspan, “Need for Financial Modernization,” testimony before the Committee on Banking, Housing, and Urban Affairs, U.S.

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.”: Alan Greenspan, “Antitrust” and “Gold and Economic Freedom,” in Ayn Rand, Capitalism: The Unknown Ideal (New York: Signet Books, 1967), 100. 229 “As Fed chairman . . .”: Greenspan, Age of Turbulence, 373. 229 “could undermine the competitiveness . . .”: Alan Greenspan, “Need for Financial Modernization,” testimony before the Committee on Banking, Housing, and Urban Affairs, U.S. Senate, February 23, 1999, available at http://federalreserve.gov/boarddocs/testimony/1999/19990223.htm. 230 “Risks in financial markets . . .”: Alan Greenspan, “Impact of Derivatives on Financial Markets,” testimony before the Telecommunications and Finance Subcommittee, House Energy and Commerce Committee, May 25, 1994. 230 “a major failure of counterparty . . .”: Greenspan, Age of Turbulence, 371. 231 “Recognizing the dangers . . .”: Rick Schmitt, “Prophet and Loss,” Stanford Magazine, March/April 2009, available at www.stanfordalumni.org/news/magazine/2009/marapr/features/born.html. 231 “Greenspan told Brooksley . . .”: Quoted in Peter S.

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Goodman, “Taking a Hard New Look at a Greenspan Legacy,” New York Times, October 9, 2008. 231 “I certainly am not . . .”: Quoted in Schmitt, “Prophet and Loss.” 232 “to mitigate the fallout . . .”: Alan Greenspan, testimony before the Committee on Banking and Financial Services, U.S. Congress, July 22, 1999, available at http://federalreserve.gov/boarddocs/hh/1999/july/testimony.htm. 232 “There appears to be enough evidence . . .”: Alan Greenspan: “Risk and Uncertainty in Monetary Policy,” remarks to the annual meeting of the American Economic Association, San Diego, January 3, 2004, available at www.federalreserve.gov/boarddocs/speeches/2004/20040103/default.htm#f8. 233 “caused it by deviating . . .”: John B.

Meltdown: How Greed and Corruption Shattered Our Financial System and How We Can Recover by Katrina Vanden Heuvel, William Greider

Alan Greenspan, Asian financial crisis, banking crisis, Bear Stearns, Bretton Woods, business cycle, buy and hold, capital controls, carried interest, central bank independence, centre right, collateralized debt obligation, conceptual framework, corporate governance, creative destruction, credit crunch, Credit Default Swap, credit default swaps / collateralized debt obligations, declining real wages, deindustrialization, Exxon Valdez, falling living standards, financial deregulation, financial innovation, Financial Instability Hypothesis, fixed income, floating exchange rates, full employment, Glass-Steagall Act, green new deal, guns versus butter model, housing crisis, Howard Zinn, Hyman Minsky, income inequality, information asymmetry, It's morning again in America, John Meriwether, junk bonds, kremlinology, Long Term Capital Management, low interest rates, margin call, market bubble, market fundamentalism, McMansion, Michael Milken, Minsky moment, money market fund, mortgage debt, Naomi Klein, new economy, Nixon triggered the end of the Bretton Woods system, offshore financial centre, payday loans, pets.com, plutocrats, Ponzi scheme, price stability, pushing on a string, race to the bottom, Ralph Nader, rent control, Robert Shiller, Ronald Reagan, Savings and loan crisis, savings glut, sovereign wealth fund, structural adjustment programs, subprime mortgage crisis, The Great Moderation, too big to fail, trade liberalization, transcontinental railway, trickle-down economics, union organizing, wage slave, Washington Consensus, women in the workforce, working poor, Y2K

For example, Peter Goodman of the New York Times produced a devastating account of how the Federal Reserve and the Clinton administration collaborated to block efforts to regulate the credit derivatives that became a critical factor in inducing the present crisis. Goodman patiently reconstructed how the Commodity Futures Trading Commission’s (CFTC) efforts to impose regulatory oversight on derivatives were stymied by Fed chair Alan Greenspan, Treasury Secretary Robert Rubin and SEC chair Arthur Levitt in 1997. Greenspan, Rubin and Levitt very publicly kneecapped commission chair Brooksley Born and effectively drove her from government. They staged a brutal dressing-down and urged Congress to prevent her from acting. Congress complied with a law blocking CFTC action.

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Today you and I own those 20,000 acres, still inhabited only by coyotes and jack rabbits, and we are spending about a million dollars a year just to keep the land-scaping in shape. As mentioned earlier, Keating was a great family man. At least ten members of his immediate kin were on the payroll of American Continental. The Keating family as a whole reaped at least $34 million in salaries, bonuses and stock sales. Alan Greenspan and the Five Stooges Keating’s biggest troubles with the government began when Gray, in one of his smartest moves, ordered in 1985 a radical reduction in the amount an S&L could invest directly in a proj ect. Lincoln was already $600 million over the maximum set by Gray. Furious and frightened, Keating went to work in his usual style to have Lincoln grandfathered under the new rule.

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Furious and frightened, Keating went to work in his usual style to have Lincoln grandfathered under the new rule. First he tried to get Gray out of the way by offering him a job at $300,000 a year. When that didn’t work, he began calling in political chits. Descending on Washington, Keating went to see Vice President Bush (aides said nothing of importance was discussed). Then Keating hired Alan Greenspan—whose conduct as a sleazy peddler of endorsements in this affair bodes no good for the future of the Federal Reserve Board, which unfortunately he now chairs—to write letters to Congressmen and to the bank board arguing that Keating’s desires should be met because he was a financier of infinitely sound judgment and ethics.

In FED We Trust: Ben Bernanke's War on the Great Panic by David Wessel

Alan Greenspan, Asian financial crisis, asset-backed security, bank run, banking crisis, banks create money, Bear Stearns, Berlin Wall, Black Swan, break the buck, business cycle, central bank independence, credit crunch, Credit Default Swap, crony capitalism, debt deflation, Fall of the Berlin Wall, financial engineering, financial innovation, financial intermediation, fixed income, full employment, George Akerlof, Glass-Steagall Act, Greenspan put, housing crisis, inflation targeting, information asymmetry, junk bonds, London Interbank Offered Rate, Long Term Capital Management, low interest rates, market bubble, Michael Milken, money market fund, moral hazard, mortgage debt, new economy, Northern Rock, price stability, quantitative easing, Robert Shiller, Ronald Reagan, Saturday Night Live, Savings and loan crisis, savings glut, Socratic dialogue, too big to fail

The New York Times editorialist, of course, could not have known about Alan Greenspan. Chapter 3 AGE OF DELUSION In the morning cold of February 6, 2006, President George W. Bush made his way by armored limo to the Federal Reserve’s Beaux Arts building, only the third time on record that any U.S. president had visited the Fed’s headquarters. The official occasion was the public swearing-in of Ben Bernanke as the chairman of the Federal Reserve, but everyone knew Bernanke’s ascension wasn’t the main event. What really was being celebrated was Alan Greenspan’s departure after nearly nineteen years as Fed chairman, the Maestro.

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CHAPTER 6: THE FOUR MUSKETEERS: BERNANKE’S BRAIN TRUST 106 “Since 1945” Frederic Mishkin, “Asymetrical Information and Financial Crises: A Historical Perspective,” National Bureau of Economic Research, Working Papers 3400, July 1990, 29. 107 “always calm and thoughtful” Laurence Meyer, A Term at the Fed: An Insider’s View (New York: HarperBusiness, 2004), 45. 108 “It is just not credible” Alan Greenspan, “Remarks by Chairman Alan Greenspan at the Haas Annual Business Faculty Research Dialogue, University of California,” from the Federal Reserve Board Web site, September 4, 1998. http://www.federalreserve.gov/boarddocs/speeches/1998/ 19980904.htm 108 That’s what he was doing: Interview, Don Kohn. 109 Before Bernanke ascended: “Panel Discussion,” Federal Reserve Bank of St.

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The early verdict Notes Glossary Selected Bibliography Acknowledgments DRAMATIS PERSONAE IN THE GOVERNMENT BEN BERNANKE Chairman, Federal Reserve Board (2006 — ) DONALD KOHN Vice Chairman, Federal Reserve Board (2006 — ) Member, Federal Reserve Board (2002 — 2006) KEVIN WARSH Member, Federal Reserve Board (2006 — ) TIMOTHY GEITHNER Secretary of the Treasury (2009 — ) President, Federal Reserve Bank of New York (2003 — 2009) HENRY PAULSON Secretary of the Treasury (2006 — 2009) ALAN GREENSPAN Chairman, Federal Reserve Board (1987 — 2006) LAWRENCE SUMMERS Director, White House National Economic Council (2009 — ) IN THE PRIVATE SECTOR JAMES DIMON Chief Executive, JPMorgan Chase (2005 — ) RICHARD FULD Chief Executive, Lehman Brothers (1994 — 2008) KENNETH LEWIS Chief Executive, Bank of America (2001 — ) VIKRAM PANDIT, Chief Executive, Citigroup (2007 — ) CHARLES PRINCE Chief Executive, Citigroup (2003 — 2007) ALAN SCHWARTZ Chief Executive, Bear Stearns (2008) President or Copresident (2001 — 2008) Introduction WHATEVER IT TAKES At the beginning of October 2008, after some of the toughest weeks of the Great Panic, the lines in Ben Bernanke’s face and the circles under his eyes offered evidence of more than a year of seven-day weeks and conference calls that stretched past midnight.

Zero-Sum Future: American Power in an Age of Anxiety by Gideon Rachman

"World Economic Forum" Davos, Alan Greenspan, Asian financial crisis, bank run, battle of ideas, Berlin Wall, Big bang: deregulation of the City of London, Bonfire of the Vanities, borderless world, Bretton Woods, BRICs, capital controls, carbon tax, centre right, clean water, collapse of Lehman Brothers, colonial rule, currency manipulation / currency intervention, deindustrialization, Deng Xiaoping, Doha Development Round, energy security, failed state, Fall of the Berlin Wall, financial deregulation, Francis Fukuyama: the end of history, full employment, Glass-Steagall Act, global reserve currency, Global Witness, Golden arches theory, Great Leap Forward, greed is good, Greenspan put, Hernando de Soto, illegal immigration, income inequality, invisible hand, It's morning again in America, Jeff Bezos, laissez-faire capitalism, Live Aid, low interest rates, market fundamentalism, Martin Wolf, mass immigration, Mexican peso crisis / tequila crisis, Mikhail Gorbachev, moral hazard, mutually assured destruction, Naomi Klein, Nelson Mandela, offshore financial centre, Oklahoma City bombing, open borders, open economy, Peace of Westphalia, peak oil, pension reform, plutocrats, popular capitalism, price stability, RAND corporation, reserve currency, rising living standards, road to serfdom, Ronald Reagan, Savings and loan crisis, shareholder value, Sinatra Doctrine, sovereign wealth fund, special economic zone, Steve Jobs, Stewart Brand, Tax Reform Act of 1986, The Chicago School, The Great Moderation, The Myth of the Rational Market, Thomas Malthus, Timothy McVeigh, trickle-down economics, Washington Consensus, Winter of Discontent, zero-sum game

The most important idea of all was the faith in market economics. 11 PROSPERITY ALAN GREENSPAN AND THE END OF ECONOMIC HISTORY When Bill Clinton gave his first speech to a joint session of Congress in February 1993, his staff choreographed the occasion with great care. First lady Hillary Clinton was sitting in the front row of the Senate gallery. Alan Greenspan, the chairman of the Federal Reserve, was placed right next to her. It was a deliberate message of reassurance to the markets and to ordinary Americans. It said, in effect, “Don’t worry. Greenspan is here.” No man better epitomized the economics of the Age of Optimism than Alan Greenspan. Appointed as chairman of the Fed for the first time in 1987 under Ronald Reagan and then reappointed by three successive presidents, Greenspan had his hands on the controls of the most powerful economy in the world throughout the period, leaving office only in 2006, just two years before the global financial crisis.

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Chollet and Goldgeier, America Between the Wars, 277. 15. Francis Fukuyama, America at the Crossroads: Democracy, Power and the Neoconservative Legacy (New Haven, Conn.: Yale University Press, 2006), x and xi. 16. Interview with the author. 17. Ibid. 11. PROSPERITY: ALAN GREENSPAN AND THE END OF ECONOMIC HISTORY 1. Bob Woodward, Maestro (New York: Simon & Schuster, 2000). 2. Alan Greenspan, The Age of Turbulence: Adventures in a New World (London: Penguin, 2007), 97. Greenspan tells this story against himself in his autobiography. 3. Ibid., 40. 4. Ibid., 41. 5. Ibid., 52. 6. Ibid., 15. 7. Ibid., 179. 8.

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Latin America, 1982–91: The Triumph of Democracy and Markets 8. India, 1991: The Second Asian Giant Awakes 9. The Gulf War, 1991: The Unipolar Moment PART TWO: THE AGE OF OPTIMISM, 1991–2008 Introduction 10. Democracy: Francis Fukuyama and the End of History 11. Prosperity: Alan Greenspan and the End of Economic History 12. Progress: Bill Gates and the Triumph of Technology 13. Peace: Bill Clinton and the Win-Win World 14. The Optimistic East: Kishore Mahbubani and the Asian Century 15. Europe: Günter Verheugen and the European Dream 16. The Antiglobalizers: From the Asian Crisis to 9/11 17.

Bad Money: Reckless Finance, Failed Politics, and the Global Crisis of American Capitalism by Kevin Phillips

"World Economic Forum" Davos, Alan Greenspan, algorithmic trading, asset-backed security, bank run, banking crisis, Bear Stearns, Bernie Madoff, Black Swan, Bretton Woods, BRICs, British Empire, business cycle, buy and hold, collateralized debt obligation, computer age, corporate raider, creative destruction, credit crunch, Credit Default Swap, credit default swaps / collateralized debt obligations, crony capitalism, currency peg, diversification, Doha Development Round, energy security, financial deregulation, financial engineering, financial innovation, fixed income, Francis Fukuyama: the end of history, George Gilder, Glass-Steagall Act, housing crisis, Hyman Minsky, imperial preference, income inequality, index arbitrage, index fund, interest rate derivative, interest rate swap, Joseph Schumpeter, junk bonds, Kenneth Rogoff, large denomination, Long Term Capital Management, low interest rates, market bubble, Martin Wolf, Menlo Park, Michael Milken, military-industrial complex, Minsky moment, mobile money, money market fund, Monroe Doctrine, moral hazard, mortgage debt, Myron Scholes, new economy, oil shale / tar sands, oil shock, old-boy network, peak oil, plutocrats, Ponzi scheme, profit maximization, prosperity theology / prosperity gospel / gospel of success, Renaissance Technologies, reserve currency, risk tolerance, risk/return, Robert Shiller, Ronald Reagan, Satyajit Das, Savings and loan crisis, shareholder value, short selling, sovereign wealth fund, stock buybacks, subprime mortgage crisis, The Chicago School, Thomas Malthus, too big to fail, trade route

For the first time since the 1920s, both public and private debt had become fashionable again—a social and political convenience, no longer a lingering nightmare (except among aging grandparents). Liquidity, debt, and leverage provided the essential structure of the Multi-bubble, and its principal architect, from 1987 to 2006, was Federal Reserve Board Chairman Alan Greenspan. He kept the liquidity flowing and declined to regulate the ultimate excesses, be they rogue derivatives, exotic mortgages, mergermania, margin-loan speculation, or a giddy succession of asset bubbles. Over his nearly two decades at the helm of U.S. monetary policy, total credit market debt in the United States quadrupled from under $11 trillion to a mind-numbing $44 trillion.

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Then over seven years, one of the most extraordinary and perilous transformations in world financial history would lift the 2008 total to $600 trillion. Figure P.2, below, illustrates the rocketing derivatives volume, along with the naive reassurances (and consequent failure to regulate) from Federal Reserve Chairmen Alan Greenspan and Ben Bernanke. FIGURE P.2 Wild About Derivatives Source : InvesTech Research, Oct. 17, 2008 Because the practices and predicaments of securitization are described in chapter 4 of the main text, these pages will focus on derivatives and securitization—both “exotic finance”—as the fourth great nurturer of the financial sector.

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At this point, though, even the mortgages themselves had often taken on unprecedented variations. In 2005, the Washington Post reported that about two hundred different mortgage products were available, and David Duncan, chief economist of the Mortgage Bankers Association, opined that a recent reference to “exotic” loans by Fed Chairman Alan Greenspan probably meant the “option adjustable rate mortgage.” This contract extraordinaire permitted borrowers to themselves decide how much to pay, the length of the loan, and when they chose to convert from a fixed rate to a variable rate or back again.18 Who, you might wonder, could offer such a mortgage?

Griftopia: Bubble Machines, Vampire Squids, and the Long Con That Is Breaking America by Matt Taibbi

addicted to oil, affirmative action, Affordable Care Act / Obamacare, Alan Greenspan, Bear Stearns, Bernie Sanders, Bretton Woods, buy and hold, carried interest, classic study, clean water, collateralized debt obligation, collective bargaining, computerized trading, creative destruction, Credit Default Swap, credit default swaps / collateralized debt obligations, crony capitalism, David Brooks, desegregation, diversification, diversified portfolio, Donald Trump, financial innovation, Glass-Steagall Act, Goldman Sachs: Vampire Squid, Gordon Gekko, greed is good, Greenspan put, illegal immigration, interest rate swap, laissez-faire capitalism, London Interbank Offered Rate, Long Term Capital Management, margin call, market bubble, medical malpractice, military-industrial complex, money market fund, moral hazard, mortgage debt, Nixon triggered the end of the Bretton Woods system, obamacare, passive investing, Ponzi scheme, prediction markets, proprietary trading, prudent man rule, quantitative easing, reserve currency, Ronald Reagan, Savings and loan crisis, Sergey Aleynikov, short selling, sovereign wealth fund, too big to fail, trickle-down economics, Y2K, Yom Kippur War

This ability to work both sides of the aisle at the same time would ultimately amaze even Barbara Walters, whom Greenspan somehow managed to make his girlfriend in the seventies. “How Alan Greenspan, a man who believed in the philosophy of little government interference and few rules of regulation, could end up becoming chairman of the greatest regulatory agency in the country is beyond me,” Walters said in 2008. How did it happen? Among other things, Alan Greenspan was one of the first Americans to really understand the nature of celebrity in the mass-media age. Thirty years before Paris Hilton, Greenspan managed to become famous for being famous—and levered that skill into one of the most powerful jobs on earth. ——— Alan Greenspan’s political career was built on a legend—the legend of the ultimate Wall Street genius, the Man with All the Answers.

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The cycle quickly repeats itself, only this time the gambler is in even worse shape than before; now he’s not only lost his own money, he’s lost his money and he owes the house for what he’s borrowed. That’s a simplistic view of what happened to the American economy under Alan Greenspan. The financial services industry inflated one speculative bubble after another, and each time the bubble burst, Greenspan and the Fed swept in to save the day by printing vast sums of money and dumping it back on Wall Street, in effect encouraging people to “drink themselves sober,” as Greenspan biographer William Fleckenstein put it. That’s why Alan Greenspan is the key to understanding this generation’s financial disaster. He repeatedly used the financial might of the state to jet-fuel the insanely regressive pyramid scheme of the bubble economy, which like actual casinos proved to be a highly efficient method for converting the scattered savings of legions of individual schmuck-citizens into the concentrated holdings of a few private individuals.

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But if the national economy is a casino and the financial services industry is turning one market after another into a Ponzi scheme, then frantically pumping new money into such a destructive system is madness, no different from lending money to wild-eyed gambling addicts on the Vegas strip—and that’s exactly what Alan Greenspan did, over and over again. Alan Greenspan met with major challenges almost immediately after taking office in August 1987. The first was the stock market correction of October of that year, and the next was the recession of the early 1990s, brought about by the collapse of the S&L industry. Both disasters were caused by phenomena Greenspan had a long track record of misunderstanding.

What Went Wrong: How the 1% Hijacked the American Middle Class . . . And What Other Countries Got Right by George R. Tyler

"Friedman doctrine" OR "shareholder theory", "World Economic Forum" Davos, 8-hour work day, active measures, activist fund / activist shareholder / activist investor, affirmative action, Affordable Care Act / Obamacare, Alan Greenspan, bank run, banking crisis, Basel III, Bear Stearns, behavioural economics, benefit corporation, Black Swan, blood diamond, blue-collar work, Bolshevik threat, bonus culture, British Empire, business cycle, business process, buy and hold, capital controls, Carmen Reinhart, carried interest, cognitive dissonance, collateralized debt obligation, collective bargaining, commoditize, company town, compensation consultant, corporate governance, corporate personhood, corporate raider, corporate social responsibility, creative destruction, credit crunch, crony capitalism, crowdsourcing, currency manipulation / currency intervention, David Brooks, David Graeber, David Ricardo: comparative advantage, declining real wages, deindustrialization, Diane Coyle, disruptive innovation, Double Irish / Dutch Sandwich, eurozone crisis, financial deregulation, financial engineering, financial innovation, fixed income, Ford Model T, Francis Fukuyama: the end of history, full employment, George Akerlof, George Gilder, Gini coefficient, Glass-Steagall Act, Gordon Gekko, Greenspan put, hiring and firing, Ida Tarbell, income inequality, independent contractor, invisible hand, job satisfaction, John Markoff, joint-stock company, Joseph Schumpeter, junk bonds, Kenneth Rogoff, labor-force participation, laissez-faire capitalism, lake wobegon effect, light touch regulation, Long Term Capital Management, low interest rates, manufacturing employment, market clearing, market fundamentalism, Martin Wolf, minimum wage unemployment, mittelstand, Money creation, moral hazard, Myron Scholes, Naomi Klein, Northern Rock, obamacare, offshore financial centre, Paul Samuelson, Paul Volcker talking about ATMs, pension reform, performance metric, Pershing Square Capital Management, pirate software, plutocrats, Ponzi scheme, precariat, price stability, profit maximization, profit motive, prosperity theology / prosperity gospel / gospel of success, purchasing power parity, race to the bottom, Ralph Nader, rent-seeking, reshoring, Richard Thaler, rising living standards, road to serfdom, Robert Gordon, Robert Shiller, rolling blackouts, Ronald Reagan, Sand Hill Road, Savings and loan crisis, shareholder value, Silicon Valley, Social Responsibility of Business Is to Increase Its Profits, South Sea Bubble, sovereign wealth fund, Steve Ballmer, Steve Jobs, stock buybacks, subprime mortgage crisis, The Chicago School, The Spirit Level, The Theory of the Leisure Class by Thorstein Veblen, The Wealth of Nations by Adam Smith, Thorstein Veblen, too big to fail, transcontinental railway, transfer pricing, trickle-down economics, tulip mania, Tyler Cowen, Tyler Cowen: Great Stagnation, union organizing, Upton Sinclair, upwardly mobile, women in the workforce, working poor, zero-sum game

In a precursor to the Wall Street bubble and 2007/2008 meltdown, taxpayers ended up on the hook for the equivalent of 2 percent of GDP.51 And it all happened again eighteen years later because President Reagan had appointed Alan Greenspan head of the Federal Reserve Banking system in 1986, making him the nation’s top bank regulator. He replaced Paul Volcker, a sober banker schooled in lessons of the Great Depression, who had just cured stagflation. Volcker believed in balanced budgets and balanced regulations—and so President Reagan replaced him with Alan Greenspan. Reagan’s economic advisors were hard-core ideologues. Milton Friedman himself, for example, believed insider trading should be legal because rules curtailing it would be too intrusive.

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He solved his dilemma by ignoring the facts, arguing that Social Security was in jeopardy. The next step was to address the sudden new funding crisis by creating a Washington committee to frame the Social Security funding issue on his terms, this one headed by his trusted ally, Alan Greenspan. Here is how David Cay Johnston described events: “A commission, chaired by Alan Greenspan …said disaster was looming. If nothing was done, Greenspan said, Social Security would start running in the red, forcing the government to borrow money to pay benefits.”22 The solution this stacked commission proposed was immediately higher payroll taxes to generate considerably more tax revenue than needed to fund Social Security.

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A few efforts to reregulate, such as the Sarbanes-Oxley Act, occurred during the Reagan era. But they were overwhelmed by dozens of deregulatory mistakes with more impact, plus pervasive regulatory paralysis engineered by Alan Greenspan. At least one official at the bank lobby group called the International Swaps and Derivatives Association joked they didn’t need a public relations firm, “because we have Alan Greenspan doing our PR for us.”18 Deregulation was also endorsed by the Clinton administration, including the Commodity Futures Modernization Act of 2000, which minimized regulation of credit derivatives, removing them from bucket shop prohibitions.

Age of Greed: The Triumph of Finance and the Decline of America, 1970 to the Present by Jeff Madrick

Abraham Maslow, accounting loophole / creative accounting, Alan Greenspan, AOL-Time Warner, Asian financial crisis, bank run, Bear Stearns, book value, Bretton Woods, business cycle, capital controls, Carl Icahn, collapse of Lehman Brothers, collateralized debt obligation, credit crunch, Credit Default Swap, credit default swaps / collateralized debt obligations, currency risk, desegregation, disintermediation, diversified portfolio, Donald Trump, financial deregulation, fixed income, floating exchange rates, Frederick Winslow Taylor, full employment, George Akerlof, Glass-Steagall Act, Greenspan put, Hyman Minsky, income inequality, index fund, inflation targeting, inventory management, invisible hand, John Bogle, John Meriwether, junk bonds, Kitchen Debate, laissez-faire capitalism, locking in a profit, Long Term Capital Management, low interest rates, market bubble, Mary Meeker, Michael Milken, minimum wage unemployment, MITM: man-in-the-middle, Money creation, money market fund, Mont Pelerin Society, moral hazard, mortgage debt, Myron Scholes, new economy, Nixon triggered the end of the Bretton Woods system, North Sea oil, Northern Rock, oil shock, Paul Samuelson, Philip Mirowski, Phillips curve, price stability, quantitative easing, Ralph Nader, rent control, road to serfdom, Robert Bork, Robert Shiller, Ronald Coase, Ronald Reagan, Ronald Reagan: Tear down this wall, scientific management, shareholder value, short selling, Silicon Valley, Simon Kuznets, tail risk, Tax Reform Act of 1986, technology bubble, Telecommunications Act of 1996, The Chicago School, The Great Moderation, too big to fail, union organizing, V2 rocket, value at risk, Vanguard fund, War on Poverty, Washington Consensus, Y2K, Yom Kippur War

Bush and active lobbying by buyout leaders. Rather than tightening financial regulations, Washington loosened them further in the next two decades, even when new crises arose. In Alan Greenspan, nominated by the Republican Reagan, but strongly supported later by Bill Clinton, the vested interests of the financial community were well served in the name of narrow free market ideology. 14 Alan Greenspan IDEOLOGUE In early 1985, Alan Greenspan wrote a long letter to federal regulators in support of Charles Keating of Lincoln Savings & Loan, who had been a client of Michael Milken’s, later imprisoned for securities fraud.

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Ted Turner, Sam Walton, and Steve Ross Size Becomes Strategy 9. Jimmy Carter Capitulation 10. Howard Jarvis and Jack Kemp Tapping the Anger 11. Paul Volcker, Jimmy Carter, and Ronald Reagan Revolution Completed Two THE NEW GUARD 12. Tom Peters and Jack Welch Promises Broken 13. Michael Milken “The Magnificent” 14. Alan Greenspan Ideologue 15. George Soros and John Meriwether Fabulous Wealth and Controversial Power 16. Sandy Weill King of the World 17. Jack Grubman, Frank Quattrone, Ken Lay, and Sandy Weill Decade of Deceit 18. Angelo Mozilo The American Tragedy 19. Jimmy Cayne, Richard Fuld, Stan O’Neal, and Chuck Prince Collapse Epilogue Notes Acknowledgments Index Illustration Credits A Note About the Author Other Books by This Author Introduction This book starts with a relatively unknown man named Lewis Uhler, a Southern Californian, who, like his father before him, hated the New Deal.

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Its stock was now trading as if it were an industrial or services growth company, earning a high price-earnings ratio due to the rapid growth of earnings—if not high enough for Wriston. And Wriston was the best paid banker in the country. He lived in the glamorous United Nations Plaza, home of Johnny Carson and Alan Greenspan, the future Federal Reserve chairman, who was something of a man about town and a prosperous Republican consultant. Wriston had married a lawyer twenty years his junior two years after his wife died in 1965, and was famously driving a red sports car—famous because it seemed out of character for the man.

Financial Fiasco: How America's Infatuation With Homeownership and Easy Money Created the Economic Crisis by Johan Norberg

accounting loophole / creative accounting, Alan Greenspan, bank run, banking crisis, Bear Stearns, Bernie Madoff, Black Monday: stock market crash in 1987, Black Swan, business cycle, capital controls, central bank independence, collateralized debt obligation, creative destruction, credit crunch, Credit Default Swap, credit default swaps / collateralized debt obligations, David Brooks, diversification, financial deregulation, financial innovation, Greenspan put, helicopter parent, Home mortgage interest deduction, housing crisis, Howard Zinn, Hyman Minsky, Isaac Newton, Joseph Schumpeter, Long Term Capital Management, low interest rates, market bubble, Martin Wolf, Mexican peso crisis / tequila crisis, millennium bug, money market fund, moral hazard, mortgage tax deduction, Naomi Klein, National Debt Clock, new economy, Northern Rock, Own Your Own Home, precautionary principle, price stability, Ronald Reagan, savings glut, short selling, Silicon Valley, South Sea Bubble, The Wealth of Nations by Adam Smith, too big to fail

A series of circumstances that individually would not have had to lead to disaster-low- and middle-income countries starting to save money; the head of a central bank's wishing to avoid a crisis; political demands to expand homeownership; new financial instruments; and new banking regulations, credit-rating requirements, and accounting rules intended to prevent cheating-came into existence at the same time and reinforced one another into what Alan Greenspan has called "a once-in-a-century event." Circumstances were perfect for a financial storm so tremendous that few people now alive have seen anything like it. The monster waves are swallowing gigantic banks and long-established industrial companies alike. The wind gusts are tearing apart entire economies.

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One billion dollars is what the stock markets of the world lost every 17 minutes in 2008 and what the federal government was spending on half an hour's worth of crisis fighting as Barack Obama assumed the presidency. Stockholm, Sweden, February 2009 1. Preemptive Keynesianism The law of supply and demand is not to be conned. As the supply of money (of claims) increases relative to the supply of tangible assets in the economy, prices must eventually rise. -Alan Greenspan, "Gold and Economic Freedom" Like so many other stories about our time, this one begins on the morning of September 11, 2001, with 19 terrorists and four passenger planes. Their attack, which cost almost 3,000 people their lives, shook our known universe. All U.S. aircraft were ordered to land immediately, and North American airspace was closed down.

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A former jazz-band saxophone player who used to move in the laissez faire circles around writer Ayn Rand. A man whose dark clothes and reserved demeanor had caused his friends to nickname him "the undertaker." After a career in the financial sector and a few stints as a presidential adviser, however, Alan Greenspan had become a pillar of the U.S. establishment. Even so, few had predicted the next step in the career of this man, who had advocated both in speech and in writing that the Federal Reserve, or "Fed," the U.S. central bank, should be closed down and that the market should instead determine the price of money, which should preferably be backed up by gold.

The Great American Stickup: How Reagan Republicans and Clinton Democrats Enriched Wall Street While Mugging Main Street by Robert Scheer

Alan Greenspan, banking crisis, Bear Stearns, Bernie Madoff, Bernie Sanders, business cycle, California energy crisis, collateralized debt obligation, corporate governance, Credit Default Swap, credit default swaps / collateralized debt obligations, do well by doing good, facts on the ground, financial deregulation, fixed income, Glass-Steagall Act, housing crisis, invisible hand, Long Term Capital Management, low interest rates, mega-rich, mortgage debt, new economy, old-boy network, Ponzi scheme, profit motive, Ralph Nader, rolling blackouts, Ronald Reagan, Savings and loan crisis, too big to fail, trickle-down economics

As President Clinton’s Treasury secretary, Rubin, the former cochair of Goldman Sachs, led the fight to free the financial markets from regulation and then went on to a $15-million-a-year job with Citigroup, the company that had most energetically lobbied for that deregulation. He should remember the line from the old cartoon strip Pogo: “We have met the enemy and he is us.” For it was this Wall Street and Democratic Party darling, along with his clique of economist super-friends—Alan Greenspan, Lawrence Summers, and a few others—who inflated a giant real estate bubble by purposely not regulating the derivatives market, resulting in oceans of money that was poured into bad loans sold as safe investments. In the process, they not only caused an avalanche of pain and misery when the bubble inevitably burst but also shredded the good reputation of the American banking system nurtured since the Great Depression.

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Not only were those making the millions and billions off the OTC derivatives market ecstatic, so were the politicians, bought off by Wall Street, who were sitting in the driver’s seat while the bubble was inflating. With credit so easy, consumers went on a binge, buying everything in sight, which in turn was a boon to the bricks-and-mortar economy. Blown upward by all this “irrational exuberance,” as then Federal Reserve Bank chair Alan Greenspan noted in one of his more honest moments, the stock market soared, creating the era of e-trade and a middle class that eagerly awaited each quarterly 401(k) report. Later, in the rubble, consumer borrowers would be scapegoated for the crash. This is the same logic as blaming passengers of a discount airline for their deaths if it turned out the plane had been flown by a monkey.

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By and large, those leaders have not been held accountable for their actions and, indeed, most often went on to reap even greater rewards as born-again reformers called upon to set right that which they had wrecked. Far too many have been granted far-reaching powers in President Barack Obama’s administration as foxes told to fix the damage they themselves have done to the henhouse. Of the leaders responsible, five names come prominently to mind: Alan Greenspan, the longtime head of the Federal Reserve; Robert Rubin, who served as Treasury secretary in the Clinton administration; Lawrence Summers, who succeeded him in that capacity; and the two top Republicans in Congress back in the 1990s dealing with finance, Phil Gramm and James Leach. Arrayed most prominently against them, far, far down the DC power ladder, were two female regulators, Born and Sheila Bair (an appointee of Bush I and II and retained as FDIC chair by Obama).

The Economists' Hour: How the False Prophets of Free Markets Fractured Our Society by Binyamin Appelbaum

90 percent rule, airline deregulation, Alan Greenspan, Alvin Roth, Andrei Shleifer, anti-communist, battle of ideas, Benoit Mandelbrot, Big bang: deregulation of the City of London, Bretton Woods, British Empire, business cycle, capital controls, Carmen Reinhart, Cass Sunstein, Celtic Tiger, central bank independence, clean water, collective bargaining, Corn Laws, correlation does not imply causation, Credit Default Swap, currency manipulation / currency intervention, David Ricardo: comparative advantage, deindustrialization, Deng Xiaoping, desegregation, Diane Coyle, Donald Trump, Dr. Strangelove, ending welfare as we know it, financial deregulation, financial engineering, financial innovation, fixed income, flag carrier, floating exchange rates, full employment, George Akerlof, George Gilder, Gini coefficient, greed is good, Greenspan put, Growth in a Time of Debt, Ida Tarbell, income inequality, income per capita, index fund, inflation targeting, invisible hand, Isaac Newton, It's morning again in America, Jean Tirole, John Markoff, Kenneth Arrow, Kenneth Rogoff, land reform, Les Trente Glorieuses, long and variable lags, Long Term Capital Management, low cost airline, low interest rates, manufacturing employment, means of production, Menlo Park, minimum wage unemployment, Mohammed Bouazizi, money market fund, Mont Pelerin Society, Network effects, new economy, Nixon triggered the end of the Bretton Woods system, oil shock, Paul Samuelson, Philip Mirowski, Phillips curve, plutocrats, precautionary principle, price stability, profit motive, public intellectual, Ralph Nader, RAND corporation, rent control, rent-seeking, Richard Thaler, road to serfdom, Robert Bork, Robert Gordon, Robert Solow, Ronald Coase, Ronald Reagan, Sam Peltzman, Savings and loan crisis, Silicon Valley, Simon Kuznets, starchitect, Steve Bannon, Steve Jobs, supply-chain management, The Chicago School, The Great Moderation, The Myth of the Rational Market, The Wealth of Nations by Adam Smith, Thomas Kuhn: the structure of scientific revolutions, transaction costs, trickle-down economics, ultimatum game, Unsafe at Any Speed, urban renewal, War on Poverty, Washington Consensus, We are all Keynesians now

John Cassidy, “The Fountainhead,” The New Yorker, April 24, 2000. 57. Interview with Alice Rivlin, September 27, 2018. 58. Interview with Alan Greenspan, March 14, 2008. 59. Soma Golden, “Why Greenspan Said ‘Yes,’ ” New York Times, July 28, 1974. 60. The quote and other details about the speeches are from Sebastian Mallaby, The Man Who Knew: The Life and Times of Alan Greenspan (New York: Penguin Press, 2016), 90. 61. Mallaby, The Man Who Knew, 4. 62. Alan Greenspan, Capitalism: The Unknown Ideal, ed. Ayn Rand (New York: Signet, 1965), 55. He continued, “Whatever damage the antitrust laws may have done to our economy, whatever distortions of the structure of the nation’s capital they may have created, these are less disastrous than the fact that the effective purpose, the hidden intent, and the actual practice of the antitrust laws in the United States have led to the condemnation of the productive and efficient members of our society because they are productive and efficient.” 63.

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Mallaby, The Man Who Knew, 724. 68. Nathaniel C. Nash, “Treasury Now Favors Creation of Huge Banks,” New York Times, June 7, 1987. 69. Nathaniel C. Nash, “Greenspan’s Lincoln Savings Regret,” New York Times, November 20, 1989. 70. “Hearing on the Nomination of Alan Greenspan,” Senate Banking Committee, July 21, 1987, 48. 71. Alan Greenspan, “Remarks Before the Economic Club of New York,” June 20, 1995. 72. Greenspan offered a particularly remarkable expression of this worldview when he was asked by the Swiss newspaper Tages-Anzeiger in 2007 for his thoughts on the upcoming U.S. presidential election.

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One night at Friedman’s apartment, they started arguing around 11:00 p.m.; three hours later, Anderson said he was too tired to continue. “All right,” Friedman responded with a big smile. “I win.”49 Anderson also joined the loose circle of libertarians that revolved around the novelist Ayn Rand. The group included a flashy economist named Alan Greenspan who had gone into business rather than academia and therefore had a posh apartment and a blue Cadillac Eldorado convertible. In the spring of 1967, Anderson read a printed version of the arguments Friedman and Oi had made against conscription at the Chicago conference and raised the idea with Nixon’s advisers.

Ayn Rand Cult by Jeff Walker

affirmative action, Alan Greenspan, Alvin Toffler, anti-communist, Ayatollah Khomeini, Berlin Wall, buy and hold, credit crunch, deindustrialization, dematerialisation, Doomsday Book, Elliott wave, gentleman farmer, George Gilder, Herbert Marcuse, Jane Jacobs, laissez-faire capitalism, Lewis Mumford, market fundamentalism, Michael Milken, Money creation, Mont Pelerin Society, price stability, Ralph Waldo Emerson, road to serfdom, Ronald Reagan, Saturday Night Live, Savings and loan crisis, school vouchers, Tipper Gore, Torches of Freedom

It is unlikely however, that the following KIEV incident will make it onto an audiocassette for sale: In February 1998, a liberal organization ran a pro-affirmative-action ad in The New York Times featuring this quotation from Alan Greenspan: “It is good for business. It is good for our society, and it is the right thing to do.” Ever since Greenspan’s favorable comments on The Passion of Ayn Rand, he had been disdained by ARI and its affiliate newsletter, but Peikoff had never personally performed the excommunicatory rites. Now he apparently had a plausible excuse. Within days he announced on KIEV that “it is necessary to set the world straight on Alan Greenspan, once and for all” and in effect “formally excommunicate” him “from any connection with Objectivism.”

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Now of course Greenspan had been quoted out of context, as anyone bothering to get ahold of the easily-obtainable text of the Greenspan speech from which the quote was uprooted would have discerned. Perhaps fearing that this goof-up might trigger another exodus from ARI, Peikoff bit the bullet and apologized. 7 Alan Greenspan: The Undertaker Takes Over There at the Dawn of Time Born the year Ayn Rand arrived in the U.S., the son of a stockbroker, Alan Greenspan graduated from New York University’s School of Commerce in 1948. He soon took a dull job at the National Industrial Conference Board, a propaganda outlet for big business, and worked on steel inventories. Through a soon-annulled marriage to Joan Mitchell (later Joan Blumenthal)—not until 1997 at age 71 would he take the plunge again—Greenspan met Ayn Rand, herself a veteran of extensive contact with other business propaganda outlets like the National Association of Manufacturers (NAM).

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Interviewed by Karen Reedstrom. Full Context (March 1991). Paul Lepanto. Return to Reason: An Introduction to Objectivism. New York: Exposition, 1971. Lewin, Tamar. The Quiet Allure of Alan Greenspan. Sunday New York Times (5 June 1983). Lewis, Martin W. Green Delusions: An Environmentalist Critique of Radical Environmentalism. Durham: Duke University Press, 1992. Lewis, Michael. Beyond Economics, Beyond Politics, Beyond Accountability. (On Alan Greenspan.) Worth (May 1995). Lewis, Sinclair. It Can’t Happen Here. New York: New American Library, 1935. Lipset, Seymour Martin. Continental Divide: The Values and Institutions of the United States and Canada.

Who Stole the American Dream? by Hedrick Smith

Affordable Care Act / Obamacare, Airbus A320, airline deregulation, Alan Greenspan, anti-communist, asset allocation, banking crisis, Bear Stearns, Boeing 747, Bonfire of the Vanities, British Empire, business cycle, business process, clean water, cloud computing, collateralized debt obligation, collective bargaining, commoditize, corporate governance, Credit Default Swap, credit default swaps / collateralized debt obligations, currency manipulation / currency intervention, David Brooks, Deng Xiaoping, desegregation, Double Irish / Dutch Sandwich, family office, financial engineering, Ford Model T, full employment, Glass-Steagall Act, global supply chain, Gordon Gekko, guest worker program, guns versus butter model, high-speed rail, hiring and firing, housing crisis, Howard Zinn, income inequality, independent contractor, index fund, industrial cluster, informal economy, invisible hand, John Bogle, Joseph Schumpeter, junk bonds, Kenneth Rogoff, Kitchen Debate, knowledge economy, knowledge worker, laissez-faire capitalism, Larry Ellison, late fees, Long Term Capital Management, low cost airline, low interest rates, manufacturing employment, market fundamentalism, Maui Hawaii, mega-rich, Michael Shellenberger, military-industrial complex, MITM: man-in-the-middle, mortgage debt, negative equity, new economy, Occupy movement, Own Your Own Home, Paul Samuelson, Peter Thiel, Plutonomy: Buying Luxury, Explaining Global Imbalances, Ponzi scheme, Powell Memorandum, proprietary trading, Ralph Nader, RAND corporation, Renaissance Technologies, reshoring, rising living standards, Robert Bork, Robert Shiller, rolodex, Ronald Reagan, Savings and loan crisis, shareholder value, Shenzhen was a fishing village, Silicon Valley, Silicon Valley startup, Solyndra, Steve Jobs, stock buybacks, tech worker, Ted Nordhaus, The Chicago School, The Spirit Level, too big to fail, transaction costs, transcontinental railway, union organizing, Unsafe at Any Speed, Vanguard fund, We are the 99%, women in the workforce, working poor, Y2K

Bhattacharya, and William S. Berliner, Mortgage-Backed Securities (Hoboken, NJ: John Wiley & Sons, 2007), preface. 4 Greenspan dismissed the risk Alan Greenspan, remarks, annual convention of Independent Community Bankers of America, Orlando, FL, March 4, 2003. 5 “Greatest global financial crisis ever” Alan Greenspan, citing Federal Reserve data, in “Activism,” International Finance 14, no. 1 (Spring 2011), http://​www.​cfr.​org. 6 “I found a flaw in the model” Alan Greenspan, testimony, House Committee on Oversight and Government Reform, October 23, 2008. 7 Greenspan went on to admit that the crash Greenspan, citing Federal Reserve data, in “Activism.” 8 “A shift in the mortgage product” James Grant, Mr.

…

“When home prices do start down,” he said, “they will fall remarkably far” and cause widespread bankruptcies. But Alan Greenspan dismissed talk of a housing “bubble.” In June 2005, he conceded “signs of froth in some local markets,” but he rejected calls from economists like Shiller for the Fed to raise interest rates more sharply to cool speculative fevers, asserting that “the U.S. economy seems to be on a reasonably firm footing.” A year later, the housing market began its tumble. In hindsight, The Wall Street Journal editorial page, normally among Greenspan’s admirers, judged that “Alan Greenspan’s policies at the Fed contributed to the credit and housing manias that led to the financial meltdown….”

…

Repetti, “Democracy, Taxes, and Wealth,” Research Paper No. 2001–03 (Newton, MA: Boston College Law School, June 14, 2011), 831. 38 Come to a similar conclusion Torsten Persson and Guido Tabellini, “Growth, Distribution, and Politics,” in Political Economy, Growth, and Business Cycles, ed. Alex Cukierman, Zvi Hercowirtz, and Leonardo Leiderman (Cambridge, MA: Massachusetts Institute of Technology Press, 1992). 39 Alan Greenspan was moved to comment Alan Greenspan, remarks, Council on Foreign Relations, March 15, 2011, http://​www.​cfr.​org; Greenspan, citing Federal Reserve data, in “Activism,” International Finance 14, no. 1 (October 2011): 165–82, http://​online​library.​wiley.​com. 40 Not business investment but consumer demand James Livingston, “It’s Consumer Spending, Stupid,” The New York Times, October 25, 2011. 41 Major banks to big pharmaceuticals Nelson D.

A First-Class Catastrophe: The Road to Black Monday, the Worst Day in Wall Street History by Diana B. Henriques

Alan Greenspan, asset allocation, bank run, banking crisis, Bear Stearns, behavioural economics, Bernie Madoff, Black Monday: stock market crash in 1987, break the buck, buttonwood tree, buy and hold, buy low sell high, call centre, Carl Icahn, centralized clearinghouse, computerized trading, Cornelius Vanderbilt, corporate governance, corporate raider, Credit Default Swap, cuban missile crisis, Dennis Tito, Edward Thorp, Elliott wave, financial deregulation, financial engineering, financial innovation, Flash crash, friendly fire, Glass-Steagall Act, index arbitrage, index fund, intangible asset, interest rate swap, It's morning again in America, junk bonds, laissez-faire capitalism, locking in a profit, Long Term Capital Management, margin call, Michael Milken, money market fund, Myron Scholes, plutocrats, Ponzi scheme, pre–internet, price stability, proprietary trading, quantitative trading / quantitative finance, random walk, Ronald Reagan, Savings and loan crisis, short selling, Silicon Valley, stock buybacks, The Chicago School, The Myth of the Rational Market, the payments system, tulip mania, uptick rule, Vanguard fund, web of trust

perhaps because their idea was novel and complex: Kyrillos, Cases in Financial Engineering, p. 804. dubbed the trio “The Committee to Save the World”: The cover was for the February 13, 1999, issue. favored a more laissez-faire approach to market regulation: Testimony of Alan Greenspan, Waxman Hearing 2008, pp. 17–18 in the searchable text file. His confidence that Wall Street could be trusted: Ibid. simply did not give enough weight to raw human nature: Alan Greenspan, The Map and the Territory 2.0: Risk, Human Nature, and the Future of Forecasting (New York: Penguin Books, 2013/2014), pp. 8, 18–34. ACKNOWLEDGMENTS Once again, I find myself thanking my lucky stars for the four guardian angels who have helped me get another book across the finish line.

…

Todd Conover, comptroller of the currency, an independent official within the Treasury Department (1981–85) E. Gerald Corrigan, vice president of the Federal Reserve Bank of New York and special assistant to New York Fed President Paul Volcker (1976–80), president of the Federal Reserve Bank of Minneapolis (1980–84), and president of the Federal Reserve Bank of New York (1985–93) Alan Greenspan, chairman of the Federal Reserve System from August 1987 to January 2006 William M. Isaac, chairman of the Federal Deposit Insurance Corporation (1981–85) Donald T. Regan, secretary of the Treasury (1981–85) and White House chief of staff (1985–87) Paul A. Volcker, president of the Federal Reserve Bank of New York (1975–79) and chairman of the Federal Reserve System (1979–87) STOCK MARKET REGULATORS Richard G.

…

His term as chairman of the Federal Reserve would expire in August 1983; it was the middle of June, and still President Reagan had not indicated whether Volcker would be reappointed. Newspaper articles reported that there were two Republican candidates being considered for the job—Preston Martin, already on the Federal Reserve Board, and Alan Greenspan, who ran an economic consulting firm in New York and had been the chairman of the Council of Economic Advisers in the Ford administration. Wall Street was nervous, and it showed; the Dow gyrated on every rumor, and even Treasury secretary Don Regan conceded that the market favored Volcker “by an overwhelming majority.”

Shaky Ground: The Strange Saga of the U.S. Mortgage Giants by Bethany McLean

activist fund / activist shareholder / activist investor, Affordable Care Act / Obamacare, Alan Greenspan, Bear Stearns, collateralized debt obligation, crony capitalism, housing crisis, junk bonds, Michael Milken, mortgage debt, negative equity, obamacare, Pershing Square Capital Management, race to the bottom, Savings and loan crisis

Bush’s who had worked as the deputy commissioner of the Social Security Administration when there was much talk of privatizing Social Security, and who then became the chairman of OFHEO in 2006, later told the FCIC that there was so much focus on cleaning up the accounting and watching interest rate risk (changes in interest rates can cause big losses for those who own mortgages) that “credit risk was not emphasized as much as it should have been.” As for the Federal Reserve, which also has responsibility for the financial system, its powerful chairman from 1987 to 2006, Alan Greenspan, was long opposed to the power in the mortgage market that Fannie and Freddie wielded. Tim Howard, Fannie Mae’s former CFO, would later charge that that was one reason no one tried to rein in the private market. “Following the lead of Fed chairman Alan Greenspan, [the Fed and the Treasury] actively were seeking to substitute free market principles, mechanisms and disciplines for government involvement and regulation wherever they could . . . subprime mortgages were the private market alternatives to loans financed by the GSEs,” Howard wrote in a 2013 book titled The Mortgage Wars: Inside Fannie Mae, Big-Money Politics, and the Collapse of the American Dream.

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When Fannie executives argued that their enemies just wanted to turn their business over to the big banks, along with their profits, I thought that was just a conspiracy theory. And even if I had believed it, I would have thought, “Well, what’s wrong with that?” I too was a believer in what Franklin Raines, Fannie’s former CEO, calls “marketification”: the idea that the free market fixes all. That was long before the financial crisis, about which even Alan Greenspan, that ardent believer in Ayn Rand’s libertarianism, said in 2008: “Those of us who have looked to the self-interest of lending institutions to protect shareholders’ equity, myself included, are in a state of shocked disbelief.” There were lots of villains in the run-up to the financial crisis, which is why Joe Nocera and I titled our 2010 book All the Devils Are Here.

…

CAST OF CHARACTERS Fannie Mae Jim Johnson CEO, 1991–1998 Franklin Raines CEO, 1999–2004 Daniel Mudd CEO, 2005–2008 Timothy Mayopoulos CEO, 2012–current Timothy Howard CFO, 1990–2004 Thomas Lund Executive Vice President of Single-Family Mortgage Business 2005-2009 Freddie Mac Leland Brendsel CEO, 1987–2003 Richard Syron CEO, 2003–2007 Federal Housing Finance Agency Ed DeMarco Director, 2009–2014 Mel Watt Director, 2014–current Office of Federal Housing Enterprise Oversight Jim Lockhart Director, 2006–2008; Director of the FHFA, 2008–2009 Armando Falcon Director, 1999–2005 White House Henry Paulson Secretary of the Treasury, 2006–2009 Timothy Geithner Secretary of the Treasury, 2009–2013 Lawrence Summers Director of the National Economic Council, 2009–2010 Gene Sperling Director of the National Economic Council, 2011–2014 Austan Goolsbee Chairman of the Council of Economic Advisers, 2010–2011 Federal Reserve Ben Bernanke Chairman, 2006–2014 Alan Greenspan Chairman, 1987–2006 Paul Volcker Chairman, 1979–1987 Marriner Eccles Chairman, 1934–1948 Congress Jeb Hensarling Chairman of the House Financial Services Committee, 2013–current Barney Frank Chairman of the House Financial Services Committee, 2007–2011 Mark Warner Democratic Senator of Virginia Bob Corker Republican Senator of Tennessee Charles Schumer Democratic Senator of New York Courts Robert Pratt Senior District Judge, District Court for the Southern District of Iowa Royce Lamberth Senior Judge, District Court for the District of Columbia Investors Richard Perry Founder of Perry Capital Bruce Berkowitz Founder and Chief Investment Officer of Fairholme Capital Management William Ackman CEO of Pershing Square Capital Management Housing Activists John Taylor President of National Community Reinvestment Coalition Judy Kennedy President and CEO of National Association of Affordable Housing Lenders, 1998–2015 Analysts Peter Wallison Scholar, American Enterprise Institute; Member, Financial Crisis Inquiry Commission Ed Pinto Scholar, American Enterprise Institute Mark Calabria Director of Financial Regulation Studies, Cato Institute Yu Yongding Member, Monetary Policy Committee of the People’s Bank of China, 2004–2006 Laurie Goodman Director, Housing Finance Policy Center Joshua Rosner Managing Director, Graham Fisher & Co.

Trillion Dollar Triage: How Jay Powell and the Fed Battled a President and a Pandemic---And Prevented Economic Disaster by Nick Timiraos

"World Economic Forum" Davos, Alan Greenspan, asset-backed security, banking crisis, Bear Stearns, Bernie Sanders, bitcoin, Black Monday: stock market crash in 1987, Bonfire of the Vanities, break the buck, central bank independence, collapse of Lehman Brothers, collective bargaining, coronavirus, corporate raider, COVID-19, credit crunch, cryptocurrency, Donald Trump, fear index, financial innovation, financial intermediation, full employment, George Akerlof, George Floyd, global pandemic, global supply chain, Greta Thunberg, implied volatility, income inequality, inflation targeting, inverted yield curve, junk bonds, lockdown, Long Term Capital Management, low interest rates, managed futures, margin call, meme stock, money market fund, moral hazard, non-fungible token, oil shock, Phillips curve, price stability, pushing on a string, quantitative easing, Rishi Sunak, risk tolerance, rolodex, Ronald Reagan, Savings and loan crisis, secular stagnation, Skype, social distancing, subprime mortgage crisis, Tesla Model S, too big to fail, unorthodox policies, Y2K, yield curve

Sebastian Mallaby, The Man Who Knew: The Life and Times of Alan Greenspan (New York: Penguin Press, 2016), 140; Safire, 496. 53. Safire, 493. 54. Greenspan has denied that he made the call, including in an interview with the author. Greenspan said he told Colson, “Chuck, I understand there is a telephone on the desk of the President and one on the desk of Arthur Burns. I would suggest they might talk to each other.” Alan Greenspan, “Federal Reserve Board Oral History Project,” June 9, 2009. https://www.federalreserve.gov/aboutthefed/files/alan-greenspan-interview-20090331.pdf 55. Mallaby, 142. 56. Ibid., 142. 57.

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He turned to Vice Chair Richard Clarida and pressed him for his worst-case scenario. “Don’t tell me what’s plausible,” said Powell. “What’s the real worst case?” “Well, Jay, if we become Italy, and we shut down the entire economy, then this will be a bigger hit than the Great Depression,” Clarida said. The names of Fed chairs are often well known—Paul Volcker, Alan Greenspan, Ben Bernanke, Janet Yellen—but the central bank’s leaders operate mostly in the background, giving bland speeches in drab hotel ballrooms to chambers of commerce and economics clubs, away from the harsh political glare bathing other institutions such as Congress and the Supreme Court. There are certain moments, however, when the Fed sheds those reservations and becomes what is tantamount to a fourth branch of government.

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That evening, during a Friday-night cruise on the Potomac River aboard the presidential yacht Sequoia, Nixon and a few advisers hatched a plot to manipulate Burns.52 With Burns pushing for wage controls, they leaked a story saying the chair was simultaneously seeking to increase his own $42,500 annual salary by $20,000.53 White House press secretary Ron Ziegler carefully refused to deny the story. In case Burns hadn’t gotten the message, Nixon adviser Charles Colson enlisted Alan Greenspan—a Burns protégé and an economic consultant for the Nixon campaign—to telephone the Fed chair. Colson had helped hatch the pay-raise-smear pressure tactic on the Sequoia, and he would later go to jail for his role in other White House dirty tricks. According to Sebastian Mallaby’s 2016 biography of Greenspan, notes from Colson suggest Greenspan spoke at length to Burns about his policy dilemma and loyalties to Nixon.54 According to those notes, Greenspan reported Burns as being “very disturbed” and “pissed off.”55 H.

Selfie: How We Became So Self-Obsessed and What It's Doing to Us by Will Storr

Abraham Maslow, Adam Curtis, Alan Greenspan, Albert Einstein, autonomous vehicles, banking crisis, bitcoin, classic study, computer age, correlation does not imply causation, Donald Trump, Douglas Engelbart, Douglas Engelbart, Elon Musk, en.wikipedia.org, gamification, gig economy, greed is good, intentional community, invisible hand, job automation, John Markoff, Kevin Roose, Kickstarter, Lewis Mumford, longitudinal study, low interest rates, Lyft, Menlo Park, meta-analysis, military-industrial complex, Mont Pelerin Society, mortgage debt, Mother of all demos, Nixon shock, Peter Thiel, prosperity theology / prosperity gospel / gospel of success, QWERTY keyboard, Rainbow Mansion, rising living standards, road to serfdom, Robert Gordon, Ronald Reagan, selective serotonin reuptake inhibitor (SSRI), Sheryl Sandberg, Silicon Valley, Silicon Valley startup, Steve Bannon, Steve Jobs, Steven Levy, Stewart Brand, synthetic biology, tech bro, tech worker, The Future of Employment, The Rise and Fall of American Growth, Tim Cook: Apple, Travis Kalanick, twin studies, Uber and Lyft, uber lyft, War on Poverty, We are as Gods, Whole Earth Catalog

Book Five: The Special Self So there was this girl, name of Alyssa Rosenbaum: My telling of the Ayn Rand, Nathaniel Branden and Alan Greenspan story is sourced from the following accounts, except where specifically noted: Ayn Rand and the World She Made, Anne C. Heller (Anchor, 2009); Ayn Rand Nation, Gary Weiss (St Martin’s Griffin, 2012); My Years with Ayn Rand, Nathaniel Branden (Jossey-Bass, 1999); Maestro: Greenspan’s Fed and the American Boom, Bob Woodward (Simon and Schuster, 2000); Alan Shrugged: Alan Greenspan, the World’s Most Powerful Banker, Jerome Tuccille (John Wiley, 2002); Alan Greenspan: The Oracle Behind the Curtain, E. Ray Canterbury (World Scientific, 2006).

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‘There is no such thing as society. There are only individual men and women and families’: Quoted in Neoliberalism: A Brief History, David Harvey (Oxford University Press, 2005), p. 23. made Greenspan ‘the single most powerful figure’: Alan Greenspan: The Oracle Behind the Curtain, E. Ray Canterbury (World Scientific, 2006), p. 1. the ‘Central Banker of Neoliberalism’: ‘The central banker of neoliberalism: Alan Greenspan steps down as Fed Chief’, Joel Geier, http://socialistworker.org/­2006-1/575/575_06_Greenspan.shtml. act as both groundskeeper and referee: Neoliberalism, Manfred B. Steger and Ravi K. Roy (Oxford University Press, 2010), p. 2.

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A lengthy New Woman article in 1991: ‘Self-Esteem: The Hope of the Future’, Wanda Urbanska, New Woman, March 1991. A year later, a Newsweek cover story: ‘Hey, I’m Terrific!’, Jerry Adler et al., Newsweek, 17 February 1992. Alan Greenspan had a problem: My account of Greenspan’s influence over Bill Clinton is largely sourced from Maestro: Greenspan’s Fed and the American Boom, Bob Woodward (Simon and Schuster, 2000) and Alan Greenspan: The Oracle Behind the Curtain, E. Ray Canterbury (World Scientific, 2006). ‘would reach 267 miles’ . . . etc.: Clinton’s Economic Plan: The Speech; Text of the President’s Address to a Joint Session of Congress; available at: http://www.nytimes.com/1993/­02/18/us/clinton-s-economic-plan-speech-text-president-s-address-joint-session-congress.html?

The Making of Global Capitalism by Leo Panitch, Sam Gindin

accounting loophole / creative accounting, active measures, airline deregulation, Alan Greenspan, anti-communist, Asian financial crisis, asset-backed security, bank run, banking crisis, barriers to entry, Basel III, Bear Stearns, Big bang: deregulation of the City of London, bilateral investment treaty, book value, Branko Milanovic, Bretton Woods, BRICs, British Empire, business cycle, call centre, capital controls, Capital in the Twenty-First Century by Thomas Piketty, carbon credits, Carmen Reinhart, central bank independence, classic study, collective bargaining, continuous integration, corporate governance, creative destruction, Credit Default Swap, crony capitalism, currency manipulation / currency intervention, currency peg, dark matter, democratizing finance, Deng Xiaoping, disintermediation, ending welfare as we know it, eurozone crisis, facts on the ground, financial deregulation, financial innovation, Financial Instability Hypothesis, financial intermediation, floating exchange rates, foreign exchange controls, full employment, Gini coefficient, Glass-Steagall Act, global value chain, guest worker program, Hyman Minsky, imperial preference, income inequality, inflation targeting, interchangeable parts, interest rate swap, Kenneth Rogoff, Kickstarter, land reform, late capitalism, liberal capitalism, liquidity trap, London Interbank Offered Rate, Long Term Capital Management, low interest rates, manufacturing employment, market bubble, market fundamentalism, Martin Wolf, means of production, military-industrial complex, money market fund, money: store of value / unit of account / medium of exchange, Monroe Doctrine, moral hazard, mortgage debt, mortgage tax deduction, Myron Scholes, new economy, Nixon triggered the end of the Bretton Woods system, non-tariff barriers, Northern Rock, oil shock, precariat, price stability, proprietary trading, quantitative easing, Ralph Nader, RAND corporation, regulatory arbitrage, reserve currency, risk tolerance, Ronald Reagan, Savings and loan crisis, scientific management, seigniorage, shareholder value, short selling, Silicon Valley, sovereign wealth fund, special drawing rights, special economic zone, stock buybacks, structural adjustment programs, subprime mortgage crisis, Tax Reform Act of 1986, The Chicago School, The Great Moderation, the payments system, The Wealth of Nations by Adam Smith, too big to fail, trade liberalization, transcontinental railway, trickle-down economics, union organizing, vertical integration, very high income, Washington Consensus, We are all Keynesians now, Works Progress Administration, zero-coupon bond, zero-sum game

,” paper prepared for the symposium sponsored by the Federal Reserve Bank of Kansas City on The Greenspan Era: Lessons for the Future, Jackson Hole, Wyoming, August 25–7, 2005. 20 Alan Greenspan and James Kennedy, “Sources and Uses of Equity Extracted from Homes,” Finance and Economics discussion Series 2007–20, Federal Reserve Board, March 2007, p. 10. 21 Financial Crisis Inquiry Report, pp. 13–14. 22 See ibid., p. 70, Figure 5.2. 23 For both the Nader quote and the data here, see Viral A. Acharya, Guaranteed To Fail: Fannie Mae, Freddie Mac and the Debacle of Mortgage Finance, Princeton: Princeton University Press, 2011, pp. 20–2. 24 Alan Greenspan, “Consumer Finance,” remarks by Chairman Alan Greenspan at the Federal Reserve Fourth Annual Community Affairs Research Conference, Washington, DC, April 8, 2005. 25 Moreover, because US FDI was so large, and the returns on it so much higher than on securities, total receipts to the US on assets abroad were higher than what was paid out on foreign assets in the US.

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., The Politics of Global Regulation, Princeton: Princeton University Press, 2009, p. 267. 2 Alan Greenspan was reappointed by Clinton as Federal Reserve chair in March 1996; Robert Rubin moved from Goldman Sachs to become the first director of Clinton’s new National Economic Council in 1993, before becoming Treasury secretary in 1995; while Lawrence Summers, a Harvard economist who was promoted in 1993 from chief economist at the Word Bank to undersecretary for international affairs at the Treasury, became Rubin’s deputy secretary in 1995, and then secretary of the Treasury in 1999. 3 See Alan Greenspan, The Age of Turbulence, New York: Penguin, 2007, pp. 367–76; Alan Greenspan, “Global Challenges,” speech to the Council on Foreign Relations, New York, July 12, 2000; and Richard W.

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This was accompanied by a broader neoliberal turn in the US, and its subsequent near-universalization as almost all the world’s states, soon including Communist ones, opened themselves up to free trade and the free movement of capital, and promoted the spread and deepening of capitalist social relations. The common tendency to analyze these developments in terms of the key tenets of neoliberal ideology as articulated by Reagan or Thatcher, or for that matter by Milton Freidman or Alan Greenspan, is a classic case of failing to see the wood for the trees. It misses the continuities between their prescriptions for free markets and the long-term goals already articulated by the American state at the time of the relaunching of global capitalism in the postwar era. And it fails to register the growing contradictions within the postwar class compromise, as the realization of near full employment and growing social expenditures took place alongside rapidly increasing commodification and ever-deepening capitalist social relations.

Foolproof: Why Safety Can Be Dangerous and How Danger Makes Us Safe by Greg Ip

Affordable Care Act / Obamacare, Air France Flight 447, air freight, airport security, Alan Greenspan, Asian financial crisis, asset-backed security, bank run, banking crisis, Bear Stearns, behavioural economics, Boeing 747, book value, break the buck, Bretton Woods, business cycle, capital controls, central bank independence, cloud computing, collateralized debt obligation, credit crunch, Credit Default Swap, credit default swaps / collateralized debt obligations, currency peg, Daniel Kahneman / Amos Tversky, diversified portfolio, double helix, endowment effect, Exxon Valdez, Eyjafjallajökull, financial deregulation, financial innovation, Financial Instability Hypothesis, floating exchange rates, foreign exchange controls, full employment, global supply chain, hindsight bias, Hyman Minsky, Joseph Schumpeter, junk bonds, Kenneth Rogoff, lateral thinking, Lewis Mumford, London Whale, Long Term Capital Management, market bubble, Michael Milken, money market fund, moral hazard, Myron Scholes, Network effects, new economy, offshore financial centre, paradox of thrift, pets.com, Ponzi scheme, proprietary trading, quantitative easing, Ralph Nader, Richard Thaler, risk tolerance, Ronald Reagan, Sam Peltzman, savings glut, scientific management, subprime mortgage crisis, tail risk, technology bubble, TED Talk, The Great Moderation, too big to fail, transaction costs, union organizing, Unsafe at Any Speed, value at risk, William Langewiesche, zero-sum game

House of Representatives Committee on Energy and Commerce Subcommittee on Oversight and Investigations,” April 1, 2014, accessed at http://docs.house.gov/meetings/IF/IF02/20140401/102033/HHRG-113-IF02-Wstate-FriedmanD-20140401.pdf. 28 When a plane crashed in 1931: Hansen, McAndrews, and Berkeley, History of Aviation Safety, 4. 29 As Alan Greenspan was fond: Alan Greenspan, Remarks on Bank Supervision, Regulation, and Risk, October 5, 1996, available at http://www.federalreserve.gov/boarddocs/speeches/1996/19961005.htm. 30 One morning in 1986: Robert Samek, “Tampa Airport Warned Pilot 4 Times about Fog,” St. Petersburg Times, November 22, 1986. 31 “To emulate the airline”: Larry D’Oench, “Letter to the Editor,” Wall Street Journal, Jan. 6, 2013. 32 general aviation accounts: Comparisons between general and commercial aviation are based on per 100,000 hours flown.

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By the early 1980s, fiscal engineering—attempting to fine-tune the economy with a burst of spending here, a tax cut there—was dead; academic economists had disavowed it, political leaders shunned it, and with budget deficits ballooning, the public couldn’t afford it. But monetary engineering—tweaking interest rates just enough to keep both inflation and recession at bay—not only survived; it was more popular than ever. Paul Volcker, Alan Greenspan, and other central bankers gained folk-hero status. For twenty-five years, unemployment and inflation steadily fell, and recessions became less frequent. This was no small thing. Every year not spent in recession, every percentage point less of unemployment, represented hundreds of billions of dollars of added income and wealth.

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When other banks could not be persuaded to take over the slowly capsizing bank, the FDIC did, becoming its largest shareholder—an unfamiliar role for an agency whose main job was to regulate and when necessary close banks, not run them. The rescue of Continental prompted a congressman to observe that a new class of banks now existed: “too big to fail.” The crises didn’t end with Volcker. In 1987, a few months after his successor, Alan Greenspan, took office, the stock market crashed. Greenspan slashed interest rates while his colleagues persuaded banks to keep lending to crippled Wall Street dealers. A total meltdown in the markets was narrowly averted; the economy never skipped a beat. The mini-crash of 1989 was also a nonevent, perhaps thanks to the Fed’s assurance of assistance.

Crisis Economics: A Crash Course in the Future of Finance by Nouriel Roubini, Stephen Mihm

Alan Greenspan, Asian financial crisis, asset-backed security, balance sheet recession, bank run, banking crisis, barriers to entry, Bear Stearns, behavioural economics, Berlin Wall, Bernie Madoff, Big bang: deregulation of the City of London, Black Swan, bond market vigilante , bonus culture, Bretton Woods, BRICs, British Empire, business cycle, call centre, capital controls, Carmen Reinhart, central bank independence, centralized clearinghouse, collapse of Lehman Brothers, collateralized debt obligation, corporate governance, creative destruction, credit crunch, Credit Default Swap, credit default swaps / collateralized debt obligations, currency risk, dark matter, David Ricardo: comparative advantage, debt deflation, Eugene Fama: efficient market hypothesis, Fall of the Berlin Wall, fiat currency, financial deregulation, financial engineering, financial innovation, Financial Instability Hypothesis, financial intermediation, full employment, George Akerlof, Glass-Steagall Act, global pandemic, global reserve currency, Gordon Gekko, Greenspan put, Growth in a Time of Debt, housing crisis, Hyman Minsky, information asymmetry, interest rate swap, invisible hand, Joseph Schumpeter, junk bonds, Kenneth Rogoff, laissez-faire capitalism, liquidity trap, London Interbank Offered Rate, Long Term Capital Management, Louis Bachelier, low interest rates, margin call, market bubble, market fundamentalism, Martin Wolf, means of production, Minsky moment, money market fund, moral hazard, mortgage debt, mortgage tax deduction, new economy, Northern Rock, offshore financial centre, oil shock, Paradox of Choice, paradox of thrift, Paul Samuelson, Ponzi scheme, price stability, principal–agent problem, private sector deleveraging, proprietary trading, pushing on a string, quantitative easing, quantitative trading / quantitative finance, race to the bottom, random walk, regulatory arbitrage, reserve currency, risk tolerance, Robert Shiller, Satyajit Das, Savings and loan crisis, savings glut, short selling, South Sea Bubble, sovereign wealth fund, special drawing rights, subprime mortgage crisis, Suez crisis 1956, The Great Moderation, The Myth of the Rational Market, The Wealth of Nations by Adam Smith, The Wisdom of Crowds, too big to fail, tulip mania, Tyler Cowen, unorthodox policies, value at risk, We are all Keynesians now, Works Progress Administration, yield curve, Yom Kippur War

pid=20601087&refer=home&sid=atEk12XYMerk. 72 as the career of Alan Greenspan amply suggests: Alan Greenspan, The Age of Turbulence: Adventures in a New World (New York: Penguin Press, 2007). 72 “In a crisis environment . . . we shouldn’t . . .”: Greenspan quoted in John M. Berry, “Black Monday for Greenspan: A Race to Forestall a Liquidity Crisis,” Washington Post, October 19, 1997. 73 “take away the punch bowl . . .”: Martin quoted in Kenneth T. Jackson, Karen Markoe, and Arnie Markoe, eds., The Scribner Encyclopedia of American Lives, vol. 5 (New York: Charles Scribner’s Sons, 2002), 73 “irrational exuberance”: Alan Greenspan, “The Challenge of Central Banking in a Democratic Society,” Francis Boyer Lecture of the American Enterprise Institute, December 5, 1996, online at http://www.federalreserve.gov/boarddocs/speeches/1996/19961205.htm. 73 it created a Greenspan put: Miller, Weller, and Zhang, “Moral Hazard and the US Stock Market.” 73 “For us to go in and audit . . .”: Greenspan quoted in Greg Ip, “Did Greenspan Add to Subprime Woes?”

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.”: Aldous Huxley, The Devils of Loudun (London: Chatto and Windus, 1952), 259. 31 greed: See, for example, Ruth Gledhill, “Rowan Williams Says ‘Human Greed’ to Blame for Financial Crisis,” Times (London), October 15, 2008. 33 “we should be quite cautious . . .”: Alan Greenspan, “Consumer Credit and Financial Modernization,” remarks to Economic Development Conference of the Greenlining Institute, San Francisco, Calif., October 11, 1997, online at http://www.federalreserve.gov/boarddocs/speeches/1997/19971011.htm. 33 “lenders are now able . . .”: Alan Greenspan, remarks to the Federal Reserve System’s Fourth Annual Community Affairs Research Conference, Washington, D.C., April 8, 2005, online at http://www.federalreserve.gov/boarddocs/speeches/2005/20050408/default.htm. 33 slashing the rate: Jean Claude Trichet, “Activism and Alertness in Monetary Policy,” lecture to “Central Banks in the 21st Century” conference, Madrid, June 8, 2006, online at http://www.ecb.int/press/key/date/2006/html/sp060608_1.en.html.

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.”: Keynes, General Theory, 159. 233 Banishing Bubbles: This section relies heavily on information contained in Nouriel Roubini, “Why Central Banks Should Burst Bubbles,” International Finance 9 (2006): 87-107. 234 writings . . . of Alan Greenspan and Ben Bernanke: See, for example, Ben S. Bernanke and Mark Gertler, “Should Central Banks Respond to Movements in Asset Prices?” American Economic Review 91 (2001): 253-57; Alan Greenspan, “Risk and Uncertainty in Monetary Policy,” speech to the annual meeting of the American Economic Association, San Diego, Calif., January 3, 2004, online at http://www.federalreserve.gov/boarddocs/speeches/2004/20040103/default.htm. 236 Regulation T: Peter Fortune, “Margin Requirements, Margin Loans, and Margin Rates: Practice and Principles,” Federal Reserve Bank of Boston New England Economic Review (2000): 19-44. 237 Asset-Based Reserve Requirements: Thomas I.

Goddess of the Market: Ayn Rand and the American Right by Jennifer Burns

Abraham Maslow, Alan Greenspan, Alvin Toffler, anti-communist, Apollo 11, bank run, barriers to entry, centralized clearinghouse, collective bargaining, creative destruction, desegregation, feminist movement, financial independence, gentleman farmer, George Gilder, Herbert Marcuse, invisible hand, jimmy wales, Joan Didion, John Markoff, Joseph Schumpeter, knowledge worker, laissez-faire capitalism, Lewis Mumford, lone genius, Menlo Park, minimum wage unemployment, Mont Pelerin Society, new economy, Norman Mailer, offshore financial centre, Ponzi scheme, profit motive, public intellectual, RAND corporation, rent control, road to serfdom, Robert Bork, rolodex, Ronald Reagan, side project, Stewart Brand, The Chicago School, The Wisdom of Crowds, union organizing, urban renewal, We are as Gods, white flight, Whole Earth Catalog

See Passion of Ayn Rand, 173, and Anne Heller, Ayn Rand and the World She Made (New York: Doubleday, 2009), 304–305. 41. ARC, 03–58; Leonard Peikoff, Oral History Interview, ARP; Mike Wallace, Oral History Interview, ARP. 42. Alan Greenspan, The Age of Turbulence: Adventures in a New World (New York, Penguin, 2007), 41. Contrary to Justin Martin in Greenspan: The Man behind the Money (Cambridge, MA: Perseus, 2000) and Jerome Tuccille in Alan Shrugged: Alan Greenspan, the World’s Most Powerful Banker (New York: Wiley, 2002), both of whom portray Nathaniel Branden as playing a major role, Greenspan remembers Rand herself as the most influential in establishing his relationship with Objectivism.

…

Although two biographies of Greenspan credit his involvement with the campaign to Len Garment, both Greenspan and Anderson remember that Anderson was the person who introduced him to Nixon and involved him in the presidential campaign. Author interview with Martin Anderson, January 11, 2008; Alan Greenspan, personal communication to author, February 27, 2009; Justin Martin, Greenspan: The Man behind the Money (Cambridge, MA: Perseus, 2000), 45; Jerome Tuccille, Alan Shrugged: Alan Greenspan, the World’s Most Powerful Banker (New York: Wiley, 2002). Anderson included an excerpt from Rand in Martin Anderson and Barbara Honegger, eds., The Military Draft: Selected Readings on Conscription (Stanford, CA: Hoover Institution Press, 1982).

…

As she grew closer to Nathan and Barbara, Rand became ensconced within a new surrogate family, a tight kinship network consisting primarily of the couple’s relatives and friends. The group included Barbara and Nathan’s cousins, Leonard Peikoff and Allan Blumenthal, Nathan’s sister and her husband, Elayne and Harry Kalberman, Barbara’s childhood friend Joan Mitchell, and Joan’s college roommate, Mary Ann Rukovina. Joan’s boyfriend and briefly her husband, Alan Greenspan, was also a regular. Many were students at New York University, where Barbara and Nathan were now enrolled. These young people were fascinated by Rand, drawn by her strong personality, her bold presentation of ideas, and her literary fame. Rand’s new group of fans dubbed themselves the “Class of ‘43” after The Fountainhead, or tongue-in-cheek, “The Collective.”

Ayn Rand and the World She Made by Anne C. Heller

affirmative action, Alan Greenspan, Albert Einstein, Alvin Toffler, American ideology, anti-communist, Apollo 11, Bolshevik threat, Charles Lindbergh, conceptual framework, Future Shock, gentleman farmer, greed is good, laissez-faire capitalism, Lewis Mumford, Milgram experiment, money market fund, Mont Pelerin Society, Neil Armstrong, New Journalism, open borders, price stability, profit motive, public intellectual, rent control, rolodex, Ronald Reagan, Silicon Valley, the scientific method, theory of mind, Thorstein Veblen, transcontinental railway, upwardly mobile, wage slave, War on Poverty, Works Progress Administration, young professional

Since they had gravitated to Rand because of their admiration for The Fountainhead, she nicknamed them “the Class of ’43,” in honor of the novel’s year of publication. With cheerful irony, the eight or nine most intimate members—Nathaniel and Barbara, Joan Mitchell and Allan Blumenthal, Leonard Peikoff, Alan Greenspan, Mary Ann Sures, and Nathaniel’s sister Elayne and her future husband Harry Kalberman—called themselves “the Collective.” Rand came to like them all, to a greater or lesser degree. At first, she disapproved of Alan Greenspan, whom she found so somber and uncommunicative that she called him “the Undertaker” behind his back. Once, during a philosophical exchange with Branden, Greenspan reportedly declared that he didn’t believe that objective reality, including his own existence, could be proved.

…

The passage surprised me by defending limitless wealth in a way that was logical, original, complex, and, though somewhat overbearing, beautifully written. I learned that Rand had often presented this long passage as a test of intelligence and literary acumen to potential new disciples, including her most famous follower, Alan Greenspan. I went on to devour her novels and, later, to read her speeches, essays, letters, journals, screenplays, and theatrical plays. (A complete list of her published works appears in the Selected Bibliography.) I became a strong admirer, albeit one with many questions and reservations. Although Rand is rarely taught in universities, new readers, most in their teens and twenties, have always found their way to her books.

…

Her defense of radical individualism and of selfishness as a capitalist virtue has won her scores of contemporary public champions, including former SEC chairman Christopher Cox, congressman and 2008 presidential contender Ron Paul, Libertarian Party founder John Hospers, Wall Street Journal editorial writer Stephen Moore, Alan Greenspan, and even Chris Matthews, MSNBC news commentator and former chief aide to liberal congressman Tip O’Neill. Forbes and Fortune regularly mention her as a heroine of young Silicon Valley entrepreneurs, game theorists, and chess masters. Yet she has stood outside the pale of respected American literary practitioners and social critics, and a quarter century after her death most readers of her novels know little about her.

After the New Economy: The Binge . . . And the Hangover That Won't Go Away by Doug Henwood

"World Economic Forum" Davos, accounting loophole / creative accounting, affirmative action, Alan Greenspan, AOL-Time Warner, Asian financial crisis, barriers to entry, Benchmark Capital, book value, borderless world, Branko Milanovic, Bretton Woods, business cycle, California energy crisis, capital controls, corporate governance, corporate raider, correlation coefficient, credit crunch, deindustrialization, dematerialisation, deskilling, digital divide, electricity market, emotional labour, ending welfare as we know it, feminist movement, fulfillment center, full employment, gender pay gap, George Gilder, glass ceiling, Glass-Steagall Act, Gordon Gekko, government statistician, greed is good, half of the world's population has never made a phone call, income inequality, indoor plumbing, intangible asset, Internet Archive, job satisfaction, joint-stock company, Kevin Kelly, labor-force participation, Larry Ellison, liquidationism / Banker’s doctrine / the Treasury view, low interest rates, manufacturing employment, Mary Meeker, means of production, Michael Milken, minimum wage unemployment, Naomi Klein, new economy, occupational segregation, PalmPilot, pets.com, post-work, profit maximization, purchasing power parity, race to the bottom, Ralph Nader, rewilding, Robert Gordon, Robert Shiller, Robert Solow, rolling blackouts, Ronald Reagan, shareholder value, Silicon Valley, Simon Kuznets, statistical model, stock buybacks, structural adjustment programs, tech worker, Telecommunications Act of 1996, telemarketer, The Bell Curve by Richard Herrnstein and Charles Murray, The Wealth of Nations by Adam Smith, total factor productivity, union organizing, War on Poverty, warehouse automation, women in the workforce, working poor, zero-sum game

And now we're forgetting about it, our amnesia encouraged by the frequent reminders that we're in a state of permanent war. There was something aberrational about the late 1990s, for sure, but the New Economy moment was a manic set of variations on ancient themes, all promoted from the highest places. Presidents and treasury secretaries restructured economies, encouraged by Wall Street analysts and Alan Greenspan.Techno-utopianism is an old theme in American culture. Bill Gates's fantasies of the frictionless economy—spun out, it's said, with the assistance of thirteen ghostwriters—^were the latest incarnation of an old elite desire to put workers and the ugly things that sometimes come with them out of sight.

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This, Uke the recent one, was jacked up with New Century fever; similar enthusiasms erupted in the late 1920s and late 1960s. The latest episode struck sometime in the mid-1990s; Shiller (2000, p. 97) cites several pioneering newspaper and magazine articles from 1996 and 1997.The mythmaking got quite a shot in the arm when it was endorsed by Alan Greenspan as he retreated from his December 1996 "irrational exuberance" speech. What a difference from 30 years earher. Then-Fed chair WiUiam McChesney Martin pubHcly expressed anxiety that speculation was getting out of control in the mid-1960s, in a way reminiscent of the 1920s, and he cited as evidence "the spreading conviction among the pubHc that 'a new economic era' had begun" (quoted in Shiller 2000, p. 224).

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It would be nice if the business class suddenly realized that the source of all wealth really is human workers, and rewarded them as such, but that's not likely to happen. Saying that it v^ makes for good cover copy, though. Another reason to take Gilder seriously is that his line on matter's overthrow has also long been celebrated by Federal Reserve chair Alan Greenspan. As far back as 1988, writing on the Wall Street Journal editorial page, Greenspan noted a near-universal trend towards tininess. Chips have replaced vacuum tubes; Thinsulate, fur; terabytes, paper securities; and intangible, knowledge-dependent services, bulky old-fashioned goods. "In fact, if all the tons of grain, cotton, ore, coal, steel, cement and the like that Americans produce were combined, their aggregate volume would not be much greater on a per capita basis than it was 50 or 75 years ago," he argued with the air of someone revealing an important truth.

End the Fed by Ron Paul

affirmative action, Alan Greenspan, Bear Stearns, Bernie Madoff, Bernie Sanders, Bretton Woods, business cycle, crony capitalism, currency manipulation / currency intervention, fiat currency, Fractional reserve banking, guns versus butter model, hiring and firing, housing crisis, illegal immigration, invisible hand, Khyber Pass, Long Term Capital Management, low interest rates, market bubble, means of production, military-industrial complex, Money creation, moral hazard, Ponzi scheme, price mechanism, reserve currency, road to serfdom, Robert Gordon, Ronald Reagan, Savings and loan crisis, too big to fail, tulip mania, We are all Keynesians now, Y2K

Being in Congress in the late 1970s and early 1980s and serving on the House Banking Committee, I met and got to question several Federal Reserve Board chairmen: Arthur Burns, William G. Miller, and Paul Volcker. Of the three, I had the most interaction with Volcker. He was more personable and smarter than the others, including the more recent board chairmen Alan Greenspan and Ben Bernanke. In my second tour of congressional duty starting in 1997, I had the opportunity to quiz them. In 1980, a major piece of banking legislation, the Monetary Control Act, was passed; many considered it a prelude to the savings and loan crisis in that decade. I expressed my concern to Chairman Volcker at a hearing that reserve requirements could be lowered to zero and the Federal Reserve could buy any asset, including foreign debt.

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Murray Rothbard argued in his testimony before the commission that it was not the gold standard that caused the Depression of the 1930s; rather, it was the misuse of the gold standard that led up to it. In the closing part of his statement, he urged that if gold were ever to return as a standard, it must be a gold coin standard where citizens have the right to have their paper currency redeemed in gold coins. Alan Greenspan also testified, and it was a rather decent statement; although he did not call for a gold standard, he advocated issuing treasury bonds that were backed by gold as an interim step in moving in that direction. In 1981, he was not as strong for the gold standard as he was in the 1960s, but not as hostile as he became later on.

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My bet is the government will not permit the use of new gold and silver bullion coins, that is, until the End the Fed revolution comes to fruition. CHAPTER 6 CONVERSATIONS WITH GREENSPAN Over the years I’ve had many interesting interchanges with Federal Reserve chairmen. The most occurred with Alan Greenspan. He fascinated me the most because of my early exposure to his support for the gold standard and disdain for the Federal Reserve and paper money. I was a subscriber to Ayn Rand’s objectivist newspaper of the 1960s and studied closely Greenspan’s 1966 article “Gold and Economic Freedom” in that publication. 1 I told him that he had made a favorable impression on me—once.

War and Gold: A Five-Hundred-Year History of Empires, Adventures, and Debt by Kwasi Kwarteng

accounting loophole / creative accounting, Alan Greenspan, anti-communist, Asian financial crisis, asset-backed security, Atahualpa, balance sheet recession, bank run, banking crisis, Bear Stearns, Big bang: deregulation of the City of London, Bretton Woods, British Empire, business cycle, California gold rush, capital controls, Carmen Reinhart, central bank independence, centre right, collapse of Lehman Brothers, collateralized debt obligation, credit crunch, currency manipulation / currency intervention, Deng Xiaoping, discovery of the americas, Etonian, eurozone crisis, fiat currency, financial engineering, financial innovation, fixed income, floating exchange rates, foreign exchange controls, Francisco Pizarro, full employment, German hyperinflation, Glass-Steagall Act, guns versus butter model, hiring and firing, income inequality, invisible hand, Isaac Newton, it's over 9,000, John Maynard Keynes: Economic Possibilities for our Grandchildren, joint-stock company, joint-stock limited liability company, Joseph Schumpeter, Kenneth Rogoff, labour market flexibility, land bank, liberal capitalism, low interest rates, market bubble, money: store of value / unit of account / medium of exchange, moral hazard, new economy, Nixon triggered the end of the Bretton Woods system, oil shock, plutocrats, Ponzi scheme, price mechanism, quantitative easing, rolodex, Ronald Reagan, South Sea Bubble, subprime mortgage crisis, Suez canal 1869, The inhabitant of London could order by telephone, sipping his morning tea in bed, the various products of the whole earth, the market place, The Wealth of Nations by Adam Smith, too big to fail, War on Poverty, Yom Kippur War

It was only in the summer of 1982 that Volcker reduced the discount rate.28 Volcker himself saw his role as that of a surgeon. Austere and frugal in his private life, he would often complain about high prices in ‘swanky’ Washington hotels.29 He was intense, secretive and lacked the polish of more sophisticated financial types. By the standards of the United States financial elite, he was not wealthy. His successor, Alan Greenspan, who had set up his own economic consultancy in the 1950s, remembered that since Volcker had been a ‘civil servant most of his career, he didn’t have much money. He kept his family at their house in suburban New York for the entire time he was Fed chairman. All he had in Washington was a tiny apartment – he invited me over once in the early 1980s.’

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Thatcher herself reportedly used the phrase ‘one of us’ to denote people who shared her deeply held convictions. She had always said that she had only gone into politics ‘to do things’, and she did indeed accomplish many ‘things’ whose legacy is still fiercely disputed.52 In the United States, another committed free-market disciple, Alan Greenspan, was appointed Chairman of the Federal Reserve to replace Paul Volcker in 1987. While Volcker had been a technocrat and career civil servant, Greenspan combined an entrepreneur’s experience of running his own economic consultancy since his late twenties with a firm ideological belief in individualism and markets.

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Benjamin Cardin, a Democrat Congressman from Maryland, contemptuously dismissed the Chinese policy announcement as ‘inadequate’. Phil English, a Republican Congressman, said, ‘If this is a last best offer, it is unacceptable.’ US politicians continued to threaten retaliatory measures, in the form of tariffs and added protection for their domestic manufactures. But other economists, notably Alan Greenspan, were more reluctant to blame China alone for the United States’ chronic trade deficit with the rest of the world. Greenspan argued that ‘America’s bloated trade deficits probably wouldn’t be helped by China revamping its currency as the Bush administration has been pressing Beijing to do.’ The Federal Reserve Chairman observed that US companies would be likely to turn to other countries ‘such as Thailand or Malaysia’ for goods they were buying from China.

Servant Economy: Where America's Elite Is Sending the Middle Class by Jeff Faux

air traffic controllers' union, Alan Greenspan, back-to-the-land, Bear Stearns, benefit corporation, Bernie Sanders, Black Swan, Bretton Woods, BRICs, British Empire, business cycle, call centre, centre right, classic study, cognitive dissonance, collateralized debt obligation, collective bargaining, creative destruction, Credit Default Swap, credit default swaps / collateralized debt obligations, crony capitalism, currency manipulation / currency intervention, David Brooks, David Ricardo: comparative advantage, disruptive innovation, falling living standards, financial deregulation, financial innovation, full employment, Glass-Steagall Act, guns versus butter model, high-speed rail, hiring and firing, Howard Zinn, Hyman Minsky, illegal immigration, indoor plumbing, informal economy, invisible hand, John Maynard Keynes: Economic Possibilities for our Grandchildren, junk bonds, Kevin Roose, Kickstarter, lake wobegon effect, Long Term Capital Management, low interest rates, market fundamentalism, Martin Wolf, McMansion, medical malpractice, Michael Milken, military-industrial complex, Minsky moment, mortgage debt, Myron Scholes, Naomi Klein, new economy, oil shock, old-boy network, open immigration, Paul Samuelson, plutocrats, price mechanism, price stability, private military company, public intellectual, radical decentralization, Ralph Nader, reserve currency, rising living standards, Robert Shiller, rolodex, Ronald Reagan, Savings and loan crisis, school vouchers, Silicon Valley, single-payer health, Solyndra, South China Sea, statistical model, Steve Jobs, Suez crisis 1956, Thomas L Friedman, Thorstein Veblen, too big to fail, trade route, Triangle Shirtwaist Factory, union organizing, upwardly mobile, urban renewal, War on Poverty, We are the 99%, working poor, Yogi Berra, Yom Kippur War, you are the product

Roger Altman, “Recent Financial Market Disruptions: Implications for the Economy and American Families,” Brookings Institution, September 26, 2007, www.brookings.edu/projects/hamiltonprojectevents. 20. Alan Greenspan, testimony before the Senate Committee on Banking, Housing and Urban Affairs, Washington, DC, July 16, 2002, http://www.federalreserve.gov/boarddocs. 21. Dean Baker, Plunder and Blunder: The Rise and Fall of the Bubble Economy (San Francisco: Berrett-Kochler, 2009), 75. 22. Robert Shiller. Irrational Exuberance (New York: Crown, 2006), xiii. 23. Edmund L. Andrews, “Greenspan Concedes Error on Regulation,” New York Times, October 23, 2008. 24. Alan Greenspan, Age of Turbulence: Adventures in a New World (New York: Penguin Press, 2002), 508. 25. Alan Greenspan, “The Challenge of Central Banking in a Democratic Society,” speech to American Enterprise Institute, December 5, 1996. 26.

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Sounding an alarm that the government would have to raise taxes or cut spending in the future to pay for the bulge in retirements represented by the baby boomers beginning in 2011, Republicans demanded that the system be “reformed” to be put on an actuarially sound basis. The problem was vastly overstated and could have been resolved with modest changes. Instead, a bipartisan commission headed by Reagan’s Federal Reserve chairman, Alan Greenspan, persuaded Congress to raise the full retirement age and to increase the payroll tax. Democrats on the commission went along. The public was told that the money would be “saved” for future retirees. But there was no safe-deposit box in which the new revenue was stored away for the future. Instead, the new revenue was used to pay for the deficits resulting from Reagan’s tax cuts and military spending spree.

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Clinton had come to the White House having promised his constituency that he would expand government spending on the social safety net, particularly health care. But his chief adviser on economic questions was Robert Rubin, a cochairman of Goldman Sachs who had been a major fundraiser for the Democrats in the 1980s and was appointed secretary of the treasury in Clinton’s second term. And Rubin’s chief adviser was Alan Greenspan. Together they convinced Clinton that the financial markets would cause a flight from the dollar unless Clinton cut the fiscal deficit left to him by Reagan and George H. W. Bush. Clinton, whose success taught him the value of close Wall Street connections, agreed. He spent much of his presidency shortchanging the Democratic Party’s constituency so he could pay off the debts run up by his two Republican predecessors’ spending on their constituency.

Fool's Gold: How the Bold Dream of a Small Tribe at J.P. Morgan Was Corrupted by Wall Street Greed and Unleashed a Catastrophe by Gillian Tett

"World Economic Forum" Davos, accounting loophole / creative accounting, Alan Greenspan, asset-backed security, bank run, banking crisis, Bear Stearns, Black-Scholes formula, Blythe Masters, book value, break the buck, Bretton Woods, business climate, business cycle, buy and hold, collateralized debt obligation, commoditize, creative destruction, credit crunch, Credit Default Swap, credit default swaps / collateralized debt obligations, diversification, easy for humans, difficult for computers, financial engineering, financial innovation, fixed income, Glass-Steagall Act, housing crisis, interest rate derivative, interest rate swap, inverted yield curve, junk bonds, Kickstarter, locking in a profit, Long Term Capital Management, low interest rates, McMansion, Michael Milken, money market fund, mortgage debt, North Sea oil, Northern Rock, Plato's cave, proprietary trading, Renaissance Technologies, risk free rate, risk tolerance, Robert Shiller, Satyajit Das, Savings and loan crisis, short selling, sovereign wealth fund, statistical model, tail risk, The Great Moderation, too big to fail, value at risk, yield curve

Another factor that fueled the trend, though, was falling interest rates. After Paul Volcker jacked up rates in 1979, inflation had tumbled. By 1983 it was running at 3.2 percent, down from 13.5 percent in 1981. The Fed was then able to trim short-term interest rates, which stimulates economic growth. In 1987, Alan Greenspan replaced Volcker as Fed chairman, and from 1989 onwards, he steadily reduced rates to fight a mild recession. That was good news for borrowers, and it also boosted bank profits, because when rates are low, banks can borrow money cheaply and lend it out to customers at higher rates, making easy returns.

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Some federal agencies, such as Sallie Mae, the student loan provider, also began offering investment products that included derivatives. Most of these products produced high returns by employing two key features. They involved bets on the level to which interest rates would fall in the future, and with rates falling so dependably on Alan Greenspan’s watch, those bets produced easy money with what seemed like very little risk. Most of these deals also involved a concept that is central to the financial world, known as “leverage.” This essentially refers to the process of using investment techniques to dramatically magnify the force or direction of a market trend (just as a lever will increase the force of a machine).

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“If the market players continue forward in the spirit of the G30 study, then regulators will have much less to do,” observed J. Carter Beese, a Securities and Exchange commissioner, in November 1993. Hancock, Brickell, and the rest of the swaps market heaved a sigh of relief. Then disaster struck. By early 1994, Fed chair Alan Greenspan was starting to fear that the US economy was overheating after several years of loose monetary policy. On February 4, 1994, he suddenly raised the federal funds rates by 25 basis points from 3 to 3.25 percent. The move, which came amid other unexpected economic data, stunned the markets, triggering a sharp fall in bond prices.

The Myth of the Rational Market: A History of Risk, Reward, and Delusion on Wall Street by Justin Fox

"Friedman doctrine" OR "shareholder theory", Abraham Wald, activist fund / activist shareholder / activist investor, Alan Greenspan, Albert Einstein, Andrei Shleifer, AOL-Time Warner, asset allocation, asset-backed security, bank run, beat the dealer, behavioural economics, Benoit Mandelbrot, Big Tech, Black Monday: stock market crash in 1987, Black-Scholes formula, book value, Bretton Woods, Brownian motion, business cycle, buy and hold, capital asset pricing model, card file, Carl Icahn, Cass Sunstein, collateralized debt obligation, compensation consultant, complexity theory, corporate governance, corporate raider, Credit Default Swap, credit default swaps / collateralized debt obligations, Daniel Kahneman / Amos Tversky, David Ricardo: comparative advantage, democratizing finance, Dennis Tito, discovery of the americas, diversification, diversified portfolio, Dr. Strangelove, Edward Glaeser, Edward Thorp, endowment effect, equity risk premium, Eugene Fama: efficient market hypothesis, experimental economics, financial innovation, Financial Instability Hypothesis, fixed income, floating exchange rates, George Akerlof, Glass-Steagall Act, Henri Poincaré, Hyman Minsky, implied volatility, impulse control, index arbitrage, index card, index fund, information asymmetry, invisible hand, Isaac Newton, John Bogle, John Meriwether, John Nash: game theory, John von Neumann, joint-stock company, Joseph Schumpeter, junk bonds, Kenneth Arrow, libertarian paternalism, linear programming, Long Term Capital Management, Louis Bachelier, low interest rates, mandelbrot fractal, market bubble, market design, Michael Milken, Myron Scholes, New Journalism, Nikolai Kondratiev, Paul Lévy, Paul Samuelson, pension reform, performance metric, Ponzi scheme, power law, prediction markets, proprietary trading, prudent man rule, pushing on a string, quantitative trading / quantitative finance, Ralph Nader, RAND corporation, random walk, Richard Thaler, risk/return, road to serfdom, Robert Bork, Robert Shiller, rolodex, Ronald Reagan, seminal paper, shareholder value, Sharpe ratio, short selling, side project, Silicon Valley, Skinner box, Social Responsibility of Business Is to Increase Its Profits, South Sea Bubble, statistical model, stocks for the long run, tech worker, The Chicago School, The Myth of the Rational Market, The Predators' Ball, the scientific method, The Wealth of Nations by Adam Smith, The Wisdom of Crowds, Thomas Kuhn: the structure of scientific revolutions, Thomas L Friedman, Thorstein Veblen, Tobin tax, transaction costs, tulip mania, Two Sigma, Tyler Cowen, value at risk, Vanguard fund, Vilfredo Pareto, volatility smile, Yogi Berra

Charles Himmelberg, Christopher Mayer, and Todd Sinai, “Assessing High House Prices: Bubbles, Fundamentals and Misperceptions,” Journal of Economic Perspectives (Fall 2005): 67–92. 12. Justin Lahart, “In Time of Tumult, Obscure Economist Gains Currency,” Wall Street Journal, Aug. 18, 2007, 1. 13. Alan Greenspan, “Reflections on Central Banking,” speech given at the annual Jackson Hole symposium of the Federal Reserve Bank of Kansas City, Aug. 26, 2005. 14. Alan Greenspan, “Mortgage Banking,” speech to the American Bankers Association Annual Convention, Palm Desert, California (via satellite), Sept. 26, 2005. 15. Alan Greenspan and James Kennedy, “Estimates of Home Mortgage Originations, Repayments and Debt on One-to-Four Family Residences,” Finance and Economics Discussion Series, Divisions of Research and Statistics and Monetary Affairs, Federal Reserve Board, 2005–41; Greenspan and Kennedy, “Sources and Uses of Equity Extracted from Homes,” Finance and Economics Discussion Series, Divisions of Research and Statistics and Monetary Affairs, Federal Reserve Board, 2007–20. 16.

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House of Representatives Committee on Oversight and Government Reform, The Financial Crisis and the Role of Federal Regulators, 110th Cong., 2d sess., preliminary transcript, 37. Downloaded at http://oversight.house.gov/story.asp?ID=2256. 2. International Swaps and Derivatives Association Market Survey results, available at www.isda.org. 3. Alan Greenspan, “Financial Derivatives,” speech to the Futures Industry Association, Boca Raton, Florida, March 19, 1999. 4. Alan Greenspan, testimony to House of Representatives Committee on Government Oversight and Reform, Oct. 23, 2008, available at http://oversight.house.gov/story.asp?ID=2256. 5. Economist Bob Shiller cites this as the earliest clear statement of the efficient market hypothesis that he has been able to find.

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Bob Shiller Points Out the Most Remarkable Error Some troublemaking young economists demonstrate that convincing evidence for financial market rationality is sadly lacking. 12. Beating the Market With Warren Buffett and Ed Thorp Just because professional investors as a group can’t reliably outperform the market doesn’t mean that some professional investors can’t. 13. Alan Greenspan Stops a Random Plunge Down Wall Street The crash of 1987 exposes big flaws in the rational finance view of risk. But a rescue by the Federal Reserve averts a full reexamination. The Fall 14. Andrei Shleifer Moves Beyond Rabbi Economics The efficient market’s critics triumph by showing why irrational market forces can sometimes be just as pervasive as the rational ones. 15.

All the Devils Are Here by Bethany McLean

Alan Greenspan, Asian financial crisis, asset-backed security, bank run, Bear Stearns, behavioural economics, Black-Scholes formula, Blythe Masters, break the buck, buy and hold, call centre, Carl Icahn, collateralized debt obligation, corporate governance, corporate raider, Credit Default Swap, credit default swaps / collateralized debt obligations, currency risk, diversification, Dr. Strangelove, Exxon Valdez, fear of failure, financial innovation, fixed income, Glass-Steagall Act, high net worth, Home mortgage interest deduction, interest rate swap, junk bonds, Ken Thompson, laissez-faire capitalism, Long Term Capital Management, low interest rates, margin call, market bubble, market fundamentalism, Maui Hawaii, Michael Milken, money market fund, moral hazard, mortgage debt, Northern Rock, Own Your Own Home, Ponzi scheme, proprietary trading, quantitative trading / quantitative finance, race to the bottom, risk/return, Ronald Reagan, Rosa Parks, Savings and loan crisis, shareholder value, short selling, South Sea Bubble, statistical model, stock buybacks, tail risk, Tax Reform Act of 1986, telemarketer, the long tail, too big to fail, value at risk, zero-sum game

Federal Reserve Ben Bernanke Chairman of the Federal Reserve starting in 2006. Timothy Geithner President of the New York Federal Reserve from 2003 to 2009. Edward “Ned” Gramlich Federal Reserve governor from 1997 to 2005. Longtime head of the Fed’s committee on consumer and community affairs under Alan Greenspan. Alan Greenspan Chairman of the Federal Reserve from 1987 to 2006. Securities and Exchange Commission Christopher Cox Chairman from 2005 to 2009. Arthur Levitt Chairman from 1993 to 2001. THE SKEPTICS Michael Burry California hedge fund manager who began shorting mortgage-backed securities in 2005.

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Robert Rubin Treasury secretary from 1995 to 1999. Previously co-chairman of Goldman Sachs. Bob Steel Undersecretary for domestic finance in 2006. Former Goldman vice chairman brought to Treasury by Paulson. Larry Summers Treasury secretary from 1999 to 2001. Rubin’s deputy before that. Along with Rubin and Alan Greenspan, the third member of “the Committee to Save the World.” Federal Deposit Insurance Corporation Sheila Bair Current chair of the FDIC. Assistant Treasury secretary for financial institutions from 2001 to 2002. Donna Tanoue Chair of the FDIC from 1998 to 2001. Federal Reserve Ben Bernanke Chairman of the Federal Reserve starting in 2006.

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The core idea behind the portfolio reflected, once again, the advantages of being a GSE. Fannie and Freddie would issue some of that low-cost debt their implied government backing made possible, use that money to buy higher-yielding mortgages, and pocket the difference. “The big, fat gap,” Federal Reserve chairman Alan Greenspan used to call it disparagingly, a phrase that perfectly captures the almost moronic simplicity of the strategy. By the end of 1998, Fannie had a $415 billion portfolio of mortgages, up from just $156 billion in 1992. In its 1996 report to Congress, the Congressional Budget Office estimated that the profit margin on this business was four to five times higher than the guarantee business.

Capitalism: Money, Morals and Markets by John Plender

activist fund / activist shareholder / activist investor, Alan Greenspan, Andrei Shleifer, asset-backed security, bank run, Berlin Wall, Big bang: deregulation of the City of London, Black Monday: stock market crash in 1987, Black Swan, bond market vigilante , bonus culture, Bretton Woods, business climate, business cycle, Capital in the Twenty-First Century by Thomas Piketty, central bank independence, collapse of Lehman Brothers, collective bargaining, computer age, Corn Laws, Cornelius Vanderbilt, corporate governance, creative destruction, credit crunch, Credit Default Swap, David Ricardo: comparative advantage, deindustrialization, Deng Xiaoping, discovery of the americas, diversification, Eugene Fama: efficient market hypothesis, eurozone crisis, failed state, Fall of the Berlin Wall, fiat currency, financial engineering, financial innovation, financial intermediation, Fractional reserve banking, full employment, Glass-Steagall Act, God and Mammon, Golden arches theory, Gordon Gekko, greed is good, Hyman Minsky, income inequality, industrial research laboratory, inflation targeting, information asymmetry, invention of the wheel, invisible hand, Isaac Newton, James Carville said: "I would like to be reincarnated as the bond market. You can intimidate everybody.", James Watt: steam engine, Johann Wolfgang von Goethe, John Maynard Keynes: Economic Possibilities for our Grandchildren, John Meriwether, joint-stock company, Joseph Schumpeter, labour market flexibility, liberal capitalism, light touch regulation, London Interbank Offered Rate, London Whale, Long Term Capital Management, manufacturing employment, Mark Zuckerberg, market bubble, market fundamentalism, mass immigration, means of production, Menlo Park, money market fund, moral hazard, moveable type in China, Myron Scholes, Nick Leeson, Northern Rock, Occupy movement, offshore financial centre, paradox of thrift, Paul Samuelson, plutocrats, price stability, principal–agent problem, profit motive, proprietary trading, quantitative easing, railway mania, regulatory arbitrage, Richard Thaler, rising living standards, risk-adjusted returns, Robert Gordon, Robert Shiller, Ronald Reagan, savings glut, shareholder value, short selling, Silicon Valley, South Sea Bubble, spice trade, Steve Jobs, technology bubble, The Chicago School, The Great Moderation, the map is not the territory, The Wealth of Nations by Adam Smith, Thorstein Veblen, time value of money, too big to fail, tulip mania, Upton Sinclair, Veblen good, We are the 99%, Wolfgang Streeck, zero-sum game

Cecchetti and Enisse Kharroubi, July 2012. 72 Epistle to Allen Lord Bathurst, Poetical Works, Oxford University Press, 1978. 73 Richard Bentley, London, 1841. 74 Joint Economic Committee, ‘Monetary Policy and the Economic Outlook’, 17 June 1999. 75 For an account of Alan Greenspan’s frequent changes of position on the bubble, see Frederick J. Sheehan’s Panderer to Power: The Untold Story of How Alan Greenspan Enriched Wall Street and Left a Legacy of Recession, McGraw-Hill, 2010. 76 http://blogs.hbr.org/2014/01/what-alan-greenspan-has-learned-since-2008 77 ‘Famous First Bubbles’, Journal of Economic Perspectives, Vol. 4, No. 2, Spring 1990. 78 The First Crash: Lessons from the South Sea Bubble, Princeton University Press, 2004. 79 Ibid. 80 Reformation of Manners: A Satyr, http://books.google.co.uk/books?

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Either way, pricking involves the central banker in substantial career risk because the logic of incurring a modest recession today to avoid a deeper one tomorrow is lost on politicians. They will simply note the current loss of output and jobs and call for the central banker’s head. That, no doubt, was why Alan Greenspan was so terrified of blowing the US economy out of the water with a pre-emptive strike against the technology bubble. The central banker’s dilemma was summed up with characteristic shrewdness by J. K. Galbraith, whose politics and economics were as far removed from Alan Greenspan’s as it was possible to be, in his book The Great Crash 1929: Action to break up a boom must always be weighed against the chance that it will cause unemployment at a politically inopportune moment.

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Reagan lauded ‘the magic of the market’. Like Margaret Thatcher in Britain, he ushered in an era of liberalisation and neo-conservatism, policies favoured by economists at the University of Chicago. Other intellectual champions of this ethos included Ayn Rand, mentor of the subsequent chairman of the Federal Reserve Alan Greenspan. Rand, a true inheritor of Mandeville’s shock-and-awe approach to philosophical issues, trumpeted free markets, argued the merits of selfishness in all things, including sexual relations, and called for a radical reduction in the role of the state. In her novel Atlas Shrugged, she did her best to turn the entrepreneur into the ultimate heroic figure and to offer a polemical glorification of moneymaking and unbridled capitalism.

The Smartest Investment Book You'll Ever Read: The Simple, Stress-Free Way to Reach Your Investment Goals by Daniel R. Solin

Alan Greenspan, asset allocation, buy and hold, corporate governance, diversification, diversified portfolio, index fund, John Bogle, market fundamentalism, money market fund, Myron Scholes, PalmPilot, passive investing, prediction markets, prudent man rule, random walk, risk tolerance, risk-adjusted returns, risk/return, transaction costs, Vanguard fund, zero-sum game

And if you had listened to him you would have missed out on a three-year stock-market boom where the S&P 500 doubled in value. So much for Mr. Greenspan's ability to time the market. Do you think your hyperactive broker or advisor has more reliable information than Alan Greenspan? The reason neither Alan Greenspan nor your hyperactive broker or advisor can accurately predict the financial markets in Canada or the United States is that neither of them has the power to change the psychology of these markets. Alan Greenspan's comment about "irrational exuberance" was his attempt to use his position of influence to "talk the market down" from the dizzying heights it had begun to attain even early in what we know now in hindsight was a bubble.

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But a study of more than 15,000 predictions made by 237 U.S. markettim ing newsletters between June 1980 and December 1992 demonstrated that 94.5% of the newsletters had gone out of business, with an average length of operation of about four years. What if you r broker was AJan Greenspan, the venerable former chairperson of the Federal Reserve Board? How lucky you are! Who in the world knows more about the direction of Nobody Can Time the Market 49 the markets than Alan Greenspan? After all, the Federal Reserve Bank sets monetary policy and is responsible for the stability of the financial system in the United States. Alan calls you. He says he is worried that the market is overheated. He refers to the investor enthusiasm for stocks as "irrational exuberance." He is concerned about a meltdown similar to the one experienced in Japan in the early 1990s.

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Any prediction that a financial market will go up or that it will go down is, at some point, going to prove right. The issue is when that time will be. Those who adhere to market timing almost always miss the absolute top or the absolute bottom. They are either too early, like those who bailed out when Alan Greenspan first spoke of 50 Your Broker or Advisor Is Keeping You rrom Being a Smart Investor irrational exuberance. Or they are toO late, like those who hung on through 200 I and 2002 after the stock market crashed and burned, because other stock market "experts" told them to use "di ps in the market as buying opportunities. " But creating the illusion of their ability to time the market is critical to the business of hyperactive brokers and advisors.

Fault Lines: How Hidden Fractures Still Threaten the World Economy by Raghuram Rajan

"World Economic Forum" Davos, accounting loophole / creative accounting, Alan Greenspan, Andrei Shleifer, Asian financial crisis, asset-backed security, assortative mating, bank run, barriers to entry, Bear Stearns, behavioural economics, Bernie Madoff, Bretton Woods, business climate, business cycle, carbon tax, Clayton Christensen, clean water, collapse of Lehman Brothers, collateralized debt obligation, colonial rule, corporate governance, credit crunch, Credit Default Swap, credit default swaps / collateralized debt obligations, crony capitalism, currency manipulation / currency intervention, currency risk, diversification, Edward Glaeser, financial innovation, fixed income, floating exchange rates, full employment, Glass-Steagall Act, global supply chain, Goldman Sachs: Vampire Squid, Greenspan put, illegal immigration, implied volatility, income inequality, index fund, interest rate swap, Joseph Schumpeter, Kaizen: continuous improvement, Kenneth Rogoff, knowledge worker, labor-force participation, Long Term Capital Management, longitudinal study, low interest rates, machine readable, market bubble, Martin Wolf, medical malpractice, microcredit, money market fund, moral hazard, new economy, Northern Rock, offshore financial centre, open economy, Phillips curve, price stability, profit motive, proprietary trading, Real Time Gross Settlement, Richard Florida, Richard Thaler, risk tolerance, Robert Shiller, Ronald Reagan, Savings and loan crisis, school vouchers, seminal paper, short selling, sovereign wealth fund, tail risk, The Great Moderation, the payments system, The Wealth of Nations by Adam Smith, too big to fail, upwardly mobile, Vanguard fund, women in the workforce, World Values Survey

Vishny, “The Limits of Arbitrage,” Journal of Finance 52, no. 1 (1997): 35–55, for a theory as to why arbitrageurs may find it difficult to bring asset prices back in line even without short-sales constraints. 15 See Claudio Borio and Philip Lowe, “Asset Prices, Financial and Monetary Stability: Exploring the Nexus,” BIS Working Paper 114, Bank for International Settlements, Basel, July 2002. 16 See, for example, Bernanke, “Asset Price Bubbles and Monetary Policy.” 17 Alan Greenspan, speech at the American Enterprise Institute, December, 5, 1996. 18 Alan Greenspan, The Age of Turbulence: Adventures in a New World (New York: Penguin Press, 2007), 176–78 19 Alan Greenspan, “Opening Remarks,” Federal Reserve Bank of Kansas City symposium, Jackson Hole, WY, August 2002. 20 Ben Bernanke, “Monetary Policy and the Housing Bubble,” speech delivered at the annual meeting of the American Economic Association, January 3, 2010. 21 Marek Jarocinski and Frank Smets, “House Prices and the Stance of Monetary Policy,” Federal Reserve Bank of St.

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Not only did the Fed reduce the profitability of taking precautions, but it implicitly encouraged bankers to borrow short-term while making long-term loans, confident the Fed would be there if funding dried up. Leverage built up throughout the system. For a long time, central banks justified not focusing on asset prices by arguing that if Alan Greenspan had acted on his intuition in 1996, he would have snuffed out a boom that, despite the slump in 2000, took the stock market and U.S. household wealth to unprecedented heights. On March 2, 2009, though, the S&P 500 closed at 700, below its level of 744.38 on the day in 1996 when Alan Greenspan made his fateful speech. Of course, to date it has regained substantial ground, but perhaps Greenspan could have averted thirteen years of lost returns if indeed he had backed his words with action on interest rates.

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Following each day’s presentations, participants go on long hikes in the beautiful Grand Teton National Park, where, amid the stunning mountain scenery, they talk central-banker shop: intense arguments about the Wicksellian rate of interest mingle with the sounds of rushing streams. The 2005 Jackson Hole Conference was to be the last for the Federal Reserve Board chairman, Alan Greenspan, and the theme, therefore, was the legacy of the Greenspan era. I was the chief economist of the International Monetary Fund (IMF) at that time, on leave from the University of Chicago, where I have taught banking and finance for the best part of two decades. I was asked to present a paper on how the financial sector had evolved during Greenspan’s term.

The End of Wall Street by Roger Lowenstein

"World Economic Forum" Davos, Alan Greenspan, Asian financial crisis, asset-backed security, bank run, banking crisis, Bear Stearns, benefit corporation, Berlin Wall, Bernie Madoff, Black Monday: stock market crash in 1987, Black Swan, break the buck, Brownian motion, Carmen Reinhart, collateralized debt obligation, credit crunch, Credit Default Swap, credit default swaps / collateralized debt obligations, diversified portfolio, eurozone crisis, Fall of the Berlin Wall, fear of failure, financial deregulation, financial engineering, fixed income, geopolitical risk, Glass-Steagall Act, Greenspan put, high net worth, Hyman Minsky, interest rate derivative, invisible hand, junk bonds, Ken Thompson, Kenneth Rogoff, London Interbank Offered Rate, Long Term Capital Management, low interest rates, margin call, market bubble, Martin Wolf, Michael Milken, money market fund, moral hazard, mortgage debt, negative equity, Northern Rock, Ponzi scheme, profit motive, race to the bottom, risk tolerance, Ronald Reagan, Rubik’s Cube, Savings and loan crisis, savings glut, short selling, sovereign wealth fund, statistical model, the payments system, too big to fail, tulip mania, Y2K

Such was the bitter fruit of Wall Street’s folly. 20 THE END OF WALL STREET Those of us who have looked to the self-interest of lending institutions to protect shareholders’ equity, myself included, are in a state of shocked disbelief. —ALAN GREENSPAN, TESTIMONY BEFORE THE HOUSE COMMITTEE ON OVERSIGHT AND GOVERNMENT REFORM, OCTOBER 23, 2008 THE CRASH PUT PAID to the intellectual model that inspired, and to a large degree facilitated, the bubble. It spelled the end of the immodest faith in Wall Street’s ability to forecast. No better testimony exists than the extraordinary recanting of Alan Greenspan, the public official most associated with the thesis that markets are ever to be trusted. Ten days after the first round of TARP investments, Greenspan appeared in the House of Representatives to, effectively, repeal the credo by which he had managed the nation’s economy for seventeen years:In recent decades, a vast risk management and pricing system has evolved, combining the best insights of mathematicians and finance experts supported by major advances in computer and communications technology.

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BAIR, chairwoman of Federal Deposit Insurance Corporation, jousted with Paulson and Bernanke and pushed for help for homeowners THOMAS C. BAXTER JR., New York Fed general counsel, directed Lehman to file for bankruptcy RICHARD BEATTIE, storied chairman of Simpson Thacher & Bartlett, counseled Willumstad of AIG that bankruptcy was an option BEN BERNANKE, succeeded Alan Greenspan as chairman of Federal Reserve on February 1, 2006; previously was a distinguished scholar who disputed that bubbles should be “pricked”; after the meltdown worked furiously to supply liquidity DONALD BERNSTEIN, partner at Davis Polk & Wardwell, tackled the daunting task of separating “bad” Lehman assets from “good” STEVEN BLACK, cohead of the investment bank of JPMorgan Chase and Jamie Dimon’s right-hand man LLOYD C.

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(JAMIE) GAMBLE, Simpson Thacher partner representing AIG, asked the government to better its terms TIMOTHY GEITHNER, president of the Federal Reserve Bank of New York, more open to bank bailouts than, initially, was Paulson; succeeded Paulson as Treasury secretary in 2009 MICHAEL GELBAND, Lehman banker who warned Fuld to lower the company’s risk level; later he feared that bankruptcy would unleash “the forces of evil” JOSEPH GREGORY, Lehman president, shielded Fuld but was slow to react to the firm’s growing risk MAURICE R. (HANK) GREENBERG, longtime CEO of AIG, forced out by New York State attorney general Eliot Spitzer in 2005 as a result of an accounting scandal, when AIG’s risk was escalating ALAN GREENSPAN, chairman of Federal Reserve from 1987 through 2006, greatly eased monetary conditions and disputed that instruments such as derivatives needed government regulation EDWARD D. HERLIHY, partner at the law firm Wachtell, Lipton, Rosen & Katz, close adviser to Paulson, Ken Lewis, John Mack, and others JOHN HOGAN, risk officer at JPMorgan investment bank; after Lehman ignored his advice, he restricted Morgan’s trading with the firm DAN JESTER, one of numerous Goldman bankers tapped by Paulson for the Treasury, became the government’s point person on AIG JAMES A.

The Lords of Easy Money: How the Federal Reserve Broke the American Economy by Christopher Leonard

2021 United States Capitol attack, Affordable Care Act / Obamacare, Airbnb, Alan Greenspan, asset-backed security, bank run, banking crisis, Basel III, Bear Stearns, collateralized debt obligation, coronavirus, corporate governance, COVID-19, Donald Trump, Dutch auction, financial engineering, financial innovation, fixed income, Ford Model T, forensic accounting, forward guidance, full employment, glass ceiling, Glass-Steagall Act, global reserve currency, Greenspan put, hydraulic fracturing, income inequality, inflation targeting, Internet Archive, inverted yield curve, junk bonds, lockdown, long and variable lags, Long Term Capital Management, low interest rates, manufacturing employment, market bubble, Money creation, mortgage debt, new economy, obamacare, pets.com, power law, proprietary trading, quantitative easing, reserve currency, risk tolerance, Robinhood: mobile stock trading app, Ronald Reagan, Silicon Valley, stock buybacks, too big to fail, yield curve

The Fed’s actions affected every aspect of economic life—albeit with long, variable lags—and its policies could spell the difference between prosperity and calamity. But if any citizen was eager to find meaning in Alan Greenspan’s statements, he made a fine art of frustrating their efforts. He intentionally spoke in a way that was not just inscrutable, but incomprehensible. This type of speech earned a nickname on Capitol Hill: “Fedspeak.” It was a language so studded with jargon and with so many concepts nested within one another that a person needed an economics PhD (or many years’ worth of experience trading on Wall Street) to make sense of it. When Alan Greenspan started to talk, everybody’s brains immediately downshifted into a low gear to do heavy uphill climbing as they struggled to figure out exactly what he was saying.

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On the opposite side were rows of chairs where staffers assembled and sat during the meeting, offering presentations when called upon. Tom Hoenig took his seat as the FOMC members made small talk and found their places. Hoenig first joined this table, as a voting member of the FOMC, when the legendary Alan Greenspan presided as chairman of the Fed. But Hoenig’s experience at the central bank went back even further than that. He had worked at the Fed under the leadership of five chairmen, starting with Arthur Burns back in the 1970s, and including the legendary tenure of Paul Volcker, who raised interest rates into the double digits in the early 1980s to beat inflation (causing a brutal recession in the bargain).

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Guffey had seen up close how Hoenig handled the Penn Square crisis, and thought he was right for the job. Hoenig won approval from the Kansas City Fed’s board and then he flew to Washington to sit for interviews with each Fed governor. Finally, Hoenig was ushered into the office of the new Fed chairman, Alan Greenspan. A soft-spoken economist with many decades of political experience in Washington, Greenspan had worked on Wall Street and in the White House under Presidents Nixon and Ford. Greenspan became chairman shortly before the stock market crash of 1987, and he won nearly universal praise for his deft handling of the crisis.

Fed Up: An Insider's Take on Why the Federal Reserve Is Bad for America by Danielle Dimartino Booth

Affordable Care Act / Obamacare, Alan Greenspan, asset-backed security, bank run, barriers to entry, Basel III, Bear Stearns, Bernie Sanders, Black Monday: stock market crash in 1987, break the buck, Bretton Woods, business cycle, central bank independence, collateralized debt obligation, corporate raider, creative destruction, credit crunch, Credit Default Swap, credit default swaps / collateralized debt obligations, diversification, Donald Trump, financial deregulation, financial engineering, financial innovation, fixed income, Flash crash, forward guidance, full employment, George Akerlof, Glass-Steagall Act, greed is good, Greenspan put, high net worth, housing crisis, income inequality, index fund, inflation targeting, interest rate swap, invisible hand, John Meriwether, Joseph Schumpeter, junk bonds, liquidity trap, London Whale, Long Term Capital Management, low interest rates, margin call, market bubble, Mexican peso crisis / tequila crisis, money market fund, moral hazard, Myron Scholes, natural language processing, Navinder Sarao, negative equity, new economy, Northern Rock, obamacare, Phillips curve, price stability, proprietary trading, pushing on a string, quantitative easing, regulatory arbitrage, Robert Shiller, Ronald Reagan, selection bias, short selling, side project, Silicon Valley, stock buybacks, tail risk, The Great Moderation, The Wealth of Nations by Adam Smith, too big to fail, trickle-down economics, yield curve

The Fed, Fisher argued: Ben Bernanke, The Courage to Act (New York: W. W. Norton & Company, 2015), 162. But the chairman: Ibid. Throughout the FOMC transcripts: Annie Lowry, “Inside the Fed’s 2007 Deliberations,” New York Times, January 18, 2013. CHAPTER 9: “LUDDITE!” Not only have individual: FRB: Alan Greenspan, “Remarks by Chairman Alan Greenspan” (speech, American Bankers Association Annual Convention, New York, New York, October 5, 2004), www.federalreserve.gov/BOARDDOCS/Speeches/2004/20041005/default.htm. They knew Chairman Volcker: Associated Press, “Central Bankers Can Thank Paul Volcker’s Love for Fly Fishing for the Jackson Hole Symposium,” BusinessIn sider.com, August 31, 2012.

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Only the quiet, unheralded loss of some fundamental freedoms: the freedom to save for our retirements risk free, the freedom to sleep in peace knowing our pensions are safe, and the freedom for U.S. companies to invest in our nation’s future. The FOMC’s vote during its final meeting of 2008 didn’t come from nowhere. It was part of a long tradition of economic interference by well-meaning bureaucrats, going back to the 1930s and accelerating with Federal Reserve Chairman Alan Greenspan in the 1980s. Greenspan championed the era of financial deregulation that drove Wall Street to levels of greed that surprised even the most hardened investment banking veterans. His pragmatic response to every crisis on Wall Street? Lower interest rates, which Greenspan did again and again and again.

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FED STATEMENT WORD COUNT: 252 EFFECTIVE FED FUNDS RATE: 5.98% 10-YR TREASURY RATE: 5.16% FED BANKS TOTAL ASSETS: $596.1B DATE: 1/1/2001 How do we know when irrational exuberance has unduly escalated asset values, which then become subject to unexpected and prolonged contractions as they have in Japan over the past decade? —ALAN GREENSPAN, DECEMBER 5, 1996 As I and one hundred other members of the sales force found seats in the conference room at Credit Suisse’s office a few days into January 2001, we grumbled and groused among ourselves. No Wall Street veteran liked being summoned to these dog and pony shows. That could mean only one thing: we were going to be told to sell something.

The Shifts and the Shocks: What We've Learned--And Have Still to Learn--From the Financial Crisis by Martin Wolf

air freight, Alan Greenspan, anti-communist, Asian financial crisis, asset allocation, asset-backed security, balance sheet recession, bank run, banking crisis, banks create money, Basel III, Bear Stearns, Ben Bernanke: helicopter money, Berlin Wall, Black Swan, bonus culture, break the buck, Bretton Woods, business cycle, call centre, capital asset pricing model, capital controls, Capital in the Twenty-First Century by Thomas Piketty, Carmen Reinhart, central bank independence, collateralized debt obligation, corporate governance, creative destruction, credit crunch, Credit Default Swap, credit default swaps / collateralized debt obligations, currency manipulation / currency intervention, currency peg, currency risk, debt deflation, deglobalization, Deng Xiaoping, diversification, double entry bookkeeping, en.wikipedia.org, Erik Brynjolfsson, Eugene Fama: efficient market hypothesis, eurozone crisis, Fall of the Berlin Wall, fiat currency, financial deregulation, financial innovation, financial repression, floating exchange rates, foreign exchange controls, forward guidance, Fractional reserve banking, full employment, Glass-Steagall Act, global rebalancing, global reserve currency, Growth in a Time of Debt, Hyman Minsky, income inequality, inflation targeting, information asymmetry, invisible hand, Joseph Schumpeter, Kenneth Rogoff, labour market flexibility, labour mobility, Les Trente Glorieuses, light touch regulation, liquidationism / Banker’s doctrine / the Treasury view, liquidity trap, Long Term Capital Management, low interest rates, mandatory minimum, margin call, market bubble, market clearing, market fragmentation, Martin Wolf, Mexican peso crisis / tequila crisis, Minsky moment, Modern Monetary Theory, Money creation, money market fund, moral hazard, mortgage debt, negative equity, new economy, North Sea oil, Northern Rock, open economy, paradox of thrift, Paul Samuelson, price stability, private sector deleveraging, proprietary trading, purchasing power parity, pushing on a string, quantitative easing, Real Time Gross Settlement, regulatory arbitrage, reserve currency, Richard Feynman, risk-adjusted returns, risk/return, road to serfdom, Robert Gordon, Robert Shiller, Ronald Reagan, savings glut, Second Machine Age, secular stagnation, shareholder value, short selling, sovereign wealth fund, special drawing rights, subprime mortgage crisis, tail risk, The Chicago School, The Great Moderation, The Market for Lemons, the market place, The Myth of the Rational Market, the payments system, The Wealth of Nations by Adam Smith, too big to fail, Tyler Cowen, Tyler Cowen: Great Stagnation, vertical integration, very high income, winner-take-all economy, zero-sum game

Gordon Brown MP, at the Mansion House, London’, 21 June 2006, http://www.ft.com/cms/s/0/00a235ba-015d-11db-af16-0000779e2340.html. 2. http://www.telegraph.co.uk/news/uknews/theroyalfamily/3386353/The-Queen-asks-why-no-one-saw-the-credit-crunch-coming.html. 3. Alan Greenspan, ‘Testimony of Dr Alan Greenspan to the House of Representatives Committee of Government Oversight and Reform’, 23 October 2008, http://www.clipsandcomment.com/2008/10/23/text-alan-greenspan-testimony-congress-october-23. 4. Walter Bagehot, Lombard Street: A Description of the Money Market (London: Henry S. King and Co., 1873), p. 11. 5. Letter to Her Majesty the Queen, 22 July 2009, http://media.ft.com/cms/3e3b6ca8-7a08-11de-b86f-00144feabdco.pdf. 6.

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Peter Sands, ‘In Banking too much Simplicity can be Dangerous’, Financial Times, 26 August 2013, http://www.ft.com/cms/s/0/15ba8044-f46a-11e2-a62e-00144feabdc0.html. 46. Haldane and Madouros, ‘The Dog and the Frisbee’, p. 22. 47. Alan Greenspan has reached a similar conclusion on the need for more capital. See The Map and the Territory: Risk, Human Nature, and the Future of Forecasting (London: Allen Lane, 2013). 48. Ben Bernanke made just this argument in 2002. See ‘Asset Price “Bubbles” and Monetary Policy’, 15 October 20012, http://www.federalreserve.gov/boarddocs/speeches/2002/20021015. Alan Greenspan had the same view. 49. On macroprudential policy, see, among many other writings, Stijn Claessens, Swati Gosh and Roxana Mihet, ‘Macro-Prudential Policies to Mitigate Financial System Vulnerabilities’, 12 November 2012, http://macrofinance.nipfp.org.in/PDF/JIMFPr_Claessens_NIPFP-DEA-JIMF_Conference_December_2012.pdf; Enrico Perotti, ‘A Blueprint for Macroprudential Policy in the Banking Union’, 16 December 2012, http://www.voxeu.org/article/blueprint-macroprudential-policy-banking-union; Otaviano Canuto and Matheus Cavallari, ‘Integrating Monetary Policy and Macroprudential Regulation’, 21 May 2013, http://www.voxeu.org/article/integrating-monetary-policy-and-macroprudential-regulation; and ‘Macro-Prudential and Micro-Prudential Regulation’, ch. 2, The Warwick Commission on International Financial Reform, In Praise of Unlevel Playing Fields, Report of the Second Warwick Commission, University of Warwick, 2009, http://www2.warwick.ac.uk/research/warwickcommission/financialreform/report/chapter_2.pdf. 8.

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‘German Corporate Governance Code (as amended 18 June 2009)’, 2009. http://www.corporate–governance–code.de/eng/kodex/1.html. Gov.uk. ‘Help to Buy: Home Ownership Schemes’, 2013. https://www.gov.uk/affordable-home-ownership-schemes/help-to-buy-equity-loans. Greenspan, Alan. ‘Testimony of Dr Alan Greenspan to the House of Representatives Committee of Government Oversight and Reform’, 23 October 2008. http://www.clipsandcomment.com/2008/10/23/text-alan-greenspan-testimony-congress-october-23. Greenspan, Alan. ‘Regulators must Risk More, and Intervene Less’, 26 July 2011. ft.com. http://blogs.ft.com/the-a-list/2011/07/26/buffers-against-risk-carry-a-cost-to-society. Greenspan, Alan.

I.O.U.: Why Everyone Owes Everyone and No One Can Pay by John Lanchester

Alan Greenspan, asset-backed security, bank run, banking crisis, Bear Stearns, Berlin Wall, Bernie Madoff, Big bang: deregulation of the City of London, Black Monday: stock market crash in 1987, Black-Scholes formula, Blythe Masters, Celtic Tiger, collateralized debt obligation, credit crunch, Credit Default Swap, credit default swaps / collateralized debt obligations, currency risk, Daniel Kahneman / Amos Tversky, diversified portfolio, double entry bookkeeping, Exxon Valdez, Fall of the Berlin Wall, financial deregulation, financial engineering, financial innovation, fixed income, George Akerlof, Glass-Steagall Act, greed is good, Greenspan put, hedonic treadmill, hindsight bias, housing crisis, Hyman Minsky, intangible asset, interest rate swap, invisible hand, James Carville said: "I would like to be reincarnated as the bond market. You can intimidate everybody.", Jane Jacobs, John Maynard Keynes: Economic Possibilities for our Grandchildren, John Meriwether, junk bonds, Kickstarter, laissez-faire capitalism, light touch regulation, liquidity trap, Long Term Capital Management, loss aversion, low interest rates, Martin Wolf, money market fund, mortgage debt, mortgage tax deduction, mutually assured destruction, Myron Scholes, negative equity, new economy, Nick Leeson, Norman Mailer, Northern Rock, off-the-grid, Own Your Own Home, Ponzi scheme, quantitative easing, reserve currency, Right to Buy, risk-adjusted returns, Robert Shiller, Ronald Reagan, Savings and loan crisis, shareholder value, South Sea Bubble, statistical model, Tax Reform Act of 1986, The Great Moderation, the payments system, too big to fail, tulip mania, Tyler Cowen, value at risk

As a result of the dot-com crash and the Enron implosion, the early years of the new millennium were a time when the money which chases the new idea, the go-go idea, had turned its attention away from the stock market. The traditional bond market, also, was not a place to seek the next new thing. The reason was simple: interest rates were, by historic standards, unusually low. Alan Greenspan, the head honcho of U.S. monetary policy during the Clinton years, had presided over a period of economic growth during which the U.S. economy seemed to have achieved a highly desirable “Goldilocks point” of being neither too hot nor too cold, so that it kept growing without causing inflation.

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I’ve said that this would normally be a self-correcting phenomenon. Because bonds were giving low yields, buyers would drift away from them; because buyers were drifting away, bonds would have to increase their yields to attract them back. Here, though, a new factor entered the equation. Economists are arguing about this phenomenon and how important it was—Alan Greenspan himself has attributed the entire bubble and crash to it—but the broad outline is apparent and can be summed up in a single word: China. The Chinese economy had boomed, and China had effectively become the factory for the developed world, making pretty much everything. (A brief check on my immediate surroundings: my underpants, socks, trousers, and T-shirt, and the shiny Apple laptop on which I’m typing these very words, were all made in China.)

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Our hardwired difficulties with probability and risk go very deep.2 Kahneman and his colleagues have created a hugely important body of work with a single big takeaway for the nonexpert reader: they have proved that we humans, even expert humans, are chronically prone to make certain sorts of cognitive mistakes. We have a particular propensity to errors in relation to risk. Given that, it was perhaps not surprising that it was a mistake involving risk that lay behind the credit crunch. It was that which Alan Greenspan was talking about when he appeared before the U.S. Congress’s House Committee on Oversight and Government Reform on October 23, 2008, and spoke about “a once-in-a-century credit tsunami” based on a “whole intellectual edifice” which had now collapsed. That’s an amazing admission for Greenspan to have made, given that he more than anyone else was in charge of the monetary policies behind both the long boom and the abrupt bust.

The Oil Kings: How the U.S., Iran, and Saudi Arabia Changed the Balance of Power in the Middle East by Andrew Scott Cooper

addicted to oil, Alan Greenspan, An Inconvenient Truth, anti-communist, Ayatollah Khomeini, banking crisis, Boycotts of Israel, energy security, falling living standards, friendly fire, full employment, Future Shock, Great Leap Forward, guns versus butter model, interchangeable parts, Kickstarter, land reform, MITM: man-in-the-middle, oil shale / tar sands, oil shock, peak oil, Ponzi scheme, Post-Keynesian economics, RAND corporation, rising living standards, Robert Bork, rolodex, Ronald Reagan, Seymour Hersh, strikebreaker, unbiased observer, uranium enrichment, urban planning, Yom Kippur War

., 39. 204 taxpayer-funded bailout of $10 million a month: Ibid. 204 Massachusetts General Hospital stopped changing bed linen every day: Ibid. 205 rose by 5.6 percent: Memorandum for the Vice President, July 3, 1975, U.S. Council of Economic Advisers, “Alan Greenspan—1975 (2),” Box 19, Gerald R. Ford Library. 205 children living in poverty: “Draft Copy of Report on Poverty in the United States,” July 2, 1975, U.S. Department of Commerce, U.S. Council of Economic Advisers, “Alan Greenspan—1975 (2),” Box 19, Gerald R. Ford Library. 205 real income declined 4 percent: Memorandum for the Vice President, July 3, 1975, U.S. Council of Economic Advisers, “Alan Greenspan—1975 (2),” Box 19, Gerald R. Ford Library. 205 46 percent of Americans told Gallup: “Seeking Relief from a Massive Migraine,” Time, September 9, 1974, 36. 205 “the soaring cost of oil and fertilizer”: “Economic Ills: Any Prescription?

…

The decisions they made were based on the lessons of history from that earlier frightening period. This mind-set—that catastrophe was just around the corner—culminated in what I like to think of as the story of the greatest financial crisis never told, when in 1976 Treasury Secretary Bill Simon, Chairman of the Council of Economic Advisers Alan Greenspan, and Chairman of the Federal Reserve Arthur Burns warned President Ford that banks on Wall Street were at risk of collapse if OPEC raised the price of oil. The U.S. economy teetered on the edge of a double-dip recession as governments in Europe slid toward insolvency. It is a scenario that may sound familiar today.

…

As we enter the second decade of the twenty-first century, more and more it is a march that is beginning to feel forced. The United States now imports almost two thirds of its oil from overseas and has gone to war twice in less than fifteen years to secure its Persian Gulf oil lifeline. “I am saddened that it is politically inconvenient to acknowledge what everyone knows: the war in Iraq is about oil,” Alan Greenspan wrote with admirable frankness in his memoir. He continued: Thus, projections of world oil supply and demand that do not note the highly precarious environment of the Middle East are avoiding the eight-hundred-pound gorilla that could bring world economic growth to a halt. I do not pretend to know how or whether the turmoil in the Middle East will be resolved.

Global Financial Crisis by Noah Berlatsky

"World Economic Forum" Davos, accounting loophole / creative accounting, Alan Greenspan, asset-backed security, banking crisis, Bear Stearns, Bretton Woods, capital controls, Celtic Tiger, centre right, circulation of elites, collapse of Lehman Brothers, collateralized debt obligation, corporate raider, credit crunch, Credit Default Swap, credit default swaps / collateralized debt obligations, deindustrialization, Doha Development Round, energy security, eurozone crisis, financial innovation, Food sovereignty, George Akerlof, Glass-Steagall Act, God and Mammon, Gordon Gekko, housing crisis, illegal immigration, income inequality, low interest rates, market bubble, market fundamentalism, mass immigration, Money creation, moral hazard, new economy, Northern Rock, purchasing power parity, quantitative easing, race to the bottom, regulatory arbitrage, reserve currency, Robert Shiller, Ronald Reagan, Savings and loan crisis, shareholder value, social contagion, South China Sea, structural adjustment programs, subprime mortgage crisis, too big to fail, trade liberalization, transfer pricing, working poor

Yet they want freedom from regulation and freedom to persue high risk investments. But the British taxpayer should not be responsible for financial risks taken outside the nation’s borders. 42 5. Low Interest Rates Caused the Crisis Tito Boeri and Luigi Guiso 53 The housing crisis was fueled by the actions of the chairman of the Federal Reserve, Alan Greenspan, who kept interest rates low. These circumstances encouraged people to borrow too much to pay for homes they could not afford. 6. Abandoning the Gold Standard Caused the Crisis Dominic Lawson 59 If currency is not backed by gold, politicians and bankers will simply print money, resulting in inflation and a cycle of boom and bust.

…

Regulators and experts also tend to be caught up in the enthusiasm, creating a speculative bubble that can have complicated and disastrous effects. As you read, consider the following questions: 1. Between 1997 and 2005, how much did homeownership rates in the United States increase, according to the U.S. Census? 2. According to Robert J. Shiller, with whom did Alan Greenspan have an overly strong ideological alignment? 3. What was the federal funds rate between mid-2003 and mid-2004? This text has been suppressed due to author restrictions. 32 Causes of the Global Financial Crisis This text has been suppressed due to author restrictions. 33 The Global Financial Crisis This text has been suppressed due to author restrictions. 34 Causes of the Global Financial Crisis This text has been suppressed due to author restrictions. 35 The Global Financial Crisis This text has been suppressed due to author restrictions. 36 Causes of the Global Financial Crisis U.S.

…

The opportunity for reform and renewal is passing us by and, if it does, financial crises will return with even greater ferocity in years to come. 52 5 Viewpoint Low Interest Rates Caused the Crisis Tito Boeri and Luigi Guiso Tito Boeri is a professor of economics at Bocconi University in Milan, Italy. Luigi Guiso is a professor of economics at the European University Institute in Florence, Italy. In the following viewpoint, the authors argue that Alan Greenspan, former chairman of the Federal Reserve, made the wrong decision in drastically lowering interest rates in response to the recession of 2001. As a result, institutions and individuals were encouraged to take on excess risk and excess debt, resulting in the global financial crisis. The authors argue that in order to preserve financial stability, it is important not to cut interest rates too quickly in the current crisis.

The Accidental Theorist: And Other Dispatches From the Dismal Science by Paul Krugman

"World Economic Forum" Davos, Alan Greenspan, Bonfire of the Vanities, Bretton Woods, business cycle, carbon tax, clean water, collective bargaining, computerized trading, corporate raider, declining real wages, floating exchange rates, full employment, George Akerlof, George Gilder, Home mortgage interest deduction, income inequality, indoor plumbing, informal economy, invisible hand, It's morning again in America, Kenneth Arrow, knowledge economy, life extension, new economy, Nick Leeson, paradox of thrift, Paul Samuelson, plutocrats, price stability, rent control, Robert Solow, Ronald Reagan, Silicon Valley, trade route, very high income, working poor, zero-sum game

You might think that raising wages would reduce the demand for labor; but some early Keynesians argued that redistributing income from profits to wages would raise consumption demand, because workers save less than capitalists (actually they don’t, but that’s another story), and therefore increase output and employment. Such paradoxes are still fun to contemplate; they still appear in some freshman economics textbooks. Nonetheless, few economists take them seriously these days. There are a number of reasons, but the most important can be stated in two words: Alan Greenspan. After all, the simple Keynesian story is one in which interest rates are independent of the level of employment and output. But in reality the Federal Reserve Board actively manages interest rates, pushing them down when it thinks employment is too low and raising them when it thinks the economy is overheating.

…

Faced with the reality of a Dow near 8,000, the lowest unemployment rate in a generation, and the smallest deficit since, well, Ronald Reagan’s first budget, some people would have tried to change the subject. Roberts, however, is made of sterner stuff. But then, what choice did he have? The standard (and true) riposte to Clintonian triumphalism is that Clinton presides over a prosperity he did not create, that the credit for the good news belongs partly to Alan Greenspan but mainly to the resilience and flexibility of America’s private sector. This escape route is not, however, available to supply-siders. If they concede that six years and counting of noninflationary growth in the nineties have had little if anything to do with the policies of Bill Clinton, they can hardly avoid the implication that seven years of expansion during the eighties may have had equally little to do with the policies of Ronald Reagan.

…

when they should be getting back to the basics (teach every child to read). The slightly depressing truth is that technology has been letting us down lately. Let’s face up to that truth, and get on with our lives. Four Percent Follies Recently a lot of influential people have been berating Alan Greenspan and his colleagues at the Federal Reserve for not allowing the economy to grow faster. The most prominent of these critics has probably been Felix Rohatyn, who was proposed though never formally nominated to become the vice-chairman of the Fed. It’s important to note that Rohatyn is not arguing for a modest change in policy, a view that many economists share.

Capitalism 4.0: The Birth of a New Economy in the Aftermath of Crisis by Anatole Kaletsky

"World Economic Forum" Davos, Alan Greenspan, bank run, banking crisis, Bear Stearns, behavioural economics, Benoit Mandelbrot, Berlin Wall, Black Swan, bond market vigilante , bonus culture, Bretton Woods, BRICs, business cycle, buy and hold, Carmen Reinhart, classic study, cognitive dissonance, collapse of Lehman Brothers, Corn Laws, correlation does not imply causation, creative destruction, credit crunch, currency manipulation / currency intervention, currency risk, David Ricardo: comparative advantage, deglobalization, Deng Xiaoping, eat what you kill, Edward Glaeser, electricity market, Eugene Fama: efficient market hypothesis, eurozone crisis, experimental economics, F. W. de Klerk, failed state, Fall of the Berlin Wall, financial deregulation, financial innovation, Financial Instability Hypothesis, floating exchange rates, foreign exchange controls, full employment, geopolitical risk, George Akerlof, global rebalancing, Goodhart's law, Great Leap Forward, Hyman Minsky, income inequality, information asymmetry, invisible hand, Isaac Newton, Joseph Schumpeter, Kenneth Arrow, Kenneth Rogoff, Kickstarter, laissez-faire capitalism, long and variable lags, Long Term Capital Management, low interest rates, mandelbrot fractal, market design, market fundamentalism, Martin Wolf, military-industrial complex, Minsky moment, Modern Monetary Theory, Money creation, money market fund, moral hazard, mortgage debt, Nelson Mandela, new economy, Nixon triggered the end of the Bretton Woods system, Northern Rock, offshore financial centre, oil shock, paradox of thrift, Pareto efficiency, Paul Samuelson, Paul Volcker talking about ATMs, peak oil, pets.com, Ponzi scheme, post-industrial society, price stability, profit maximization, profit motive, quantitative easing, Ralph Waldo Emerson, random walk, rent-seeking, reserve currency, rising living standards, Robert Shiller, Robert Solow, Ronald Reagan, Savings and loan crisis, seminal paper, shareholder value, short selling, South Sea Bubble, sovereign wealth fund, special drawing rights, statistical model, systems thinking, The Chicago School, The Great Moderation, The inhabitant of London could order by telephone, sipping his morning tea in bed, the various products of the whole earth, The Wealth of Nations by Adam Smith, Thomas Kuhn: the structure of scientific revolutions, too big to fail, Vilfredo Pareto, Washington Consensus, zero-sum game

Freer markets and smaller government can no longer be presented as a credible answer to every challenge facing the capitalist system. The symbolic confirmation that, for serious policymakers, the love affair with market fundamentalism was over came in August 2009, in the famous Congressional testimony of Alan Greenspan, a proud disciple of the quintessential free-market ideologue, Ayn Rand. Asked whether his free-market beliefs had proved dangerously flawed, Greenspan replied: “Yes, I have found a flaw. I don’t know how significant or permanent it is, but I’ve been very distressed by that fact . . . Yes, I found a flaw.

…

If we consider democratic capitalism as a successful problem-solving machine, the implications of this view are very relevant to the 2007-09 economic crisis, but diametrically opposed to the conventional wisdom that prevailed in its aftermath. Governments all over the world were ridiculed for trying to resolve a crisis caused by too much borrowing by borrowing even more. Alan Greenspan was accused of trying to delay an inevitable “day of reckoning” by creating ever-bigger financial bubbles. Regulators were attacked for letting half-dead, “zombie” banks stagger on instead of putting them to death. But these charges missed the point of what the democratic capitalist system is designed to achieve.

…

By the late 1980s, however, governments in the main advanced economies had become surprisingly responsible with their newfound monetary freedom—inspiring a degree of faith in pure paper money that no one would have imagined possible when the gold link was abandoned in 1971. In the United States, the arrival of Ronald Reagan at the White House and Paul Volcker at the Federal Reserve reduced inflation to moderate levels by 1982, and the skillful handling of the 1987 stock market crash by Volcker’s successor, Alan Greenspan, inspired tremendous confidence in the Fed’s monetary management. An even clearer symbol of the burgeoning belief in paper money was the upsurge of confidence in the German mark and the Japanese yen, which culminated in two of the most extraordinary events in economic history, both occurring in 1989.

Pivotal Decade: How the United States Traded Factories for Finance in the Seventies by Judith Stein

1960s counterculture, accelerated depreciation, activist lawyer, affirmative action, airline deregulation, Alan Greenspan, anti-communist, Ayatollah Khomeini, barriers to entry, Berlin Wall, blue-collar work, Bretton Woods, business cycle, capital controls, centre right, collective bargaining, Credit Default Swap, crony capitalism, David Ricardo: comparative advantage, deindustrialization, desegregation, do well by doing good, Dr. Strangelove, energy security, Fall of the Berlin Wall, falling living standards, feminist movement, financial deregulation, floating exchange rates, full employment, Glass-Steagall Act, Gunnar Myrdal, guns versus butter model, Ida Tarbell, income inequality, income per capita, intermodal, invisible hand, knowledge worker, laissez-faire capitalism, Les Trente Glorieuses, liberal capitalism, Long Term Capital Management, low interest rates, manufacturing employment, market bubble, Martin Wolf, new economy, Nixon triggered the end of the Bretton Woods system, oil shale / tar sands, oil shock, open economy, Paul Samuelson, payday loans, post-industrial society, post-oil, price mechanism, price stability, Ralph Nader, RAND corporation, reserve currency, Robert Gordon, Robert Solow, Ronald Reagan, Savings and loan crisis, Simon Kuznets, strikebreaker, three-martini lunch, trade liberalization, union organizing, urban planning, urban renewal, War on Poverty, Washington Consensus, working poor, Yom Kippur War

True, an anti-Jamaica campaign unquestionably existed among right wing journalists in the U.S.118 But there is no evidence that the CIA or any other government agency was attempting to dislodge the Manley government.119 Kissinger advised the U.S. ambassador in Kingston to “discreetly” discourage any visit with Edward Seaga, Manley’s opponent in the elections, even though the more conservative Seaga was preferred to Manley.120 Kissinger himself urged Ford to resume the PL-480 food program to Jamaica, which had been ended because the program was being reserved for the poorest of the poor countries, and Jamaica no longer qualified.121 The economic heavyweights in the administration, Alan Greenspan and William Seidman, both recommended ending it for Jamaica. But their objections were based upon their opposition to the program and had nothing to do with Cuba. Kissinger was no economic radical, but he was no ideologue either. He supported aid to Jamaica for strategic reasons. The secretary of state told Ford that Castro was cultivating Jamaica, and Manley was suspicious of American motives.

…

I think we have our backs to the wall.”12 Whether capitalism was on the run or not, most people thought that government had to fix things. Even those who generally preferred the market embraced the state. Nixon’s chief economist, Herbert Stein, said, “Maybe we need an economic planning agency like the Japanese or French.”13 Even Alan Greenspan, Stein’s replacement under President Ford, thought the country might require a new Reconstruction Finance Corporation, the depression agency that lent to banks and corporations.14 Americans alone did not confront what some called “the crisis of the west.” European and Japanese economies sputtered, and class conflicts escalated everywhere.

…

Nixon’s advisers Herbert Stein and William Simon had already concluded that inflation was the major issue and accepted the unpublicized corollary that lowering the rate would require “some pain and sacrifice.”38 Shortly before Nixon resigned, Stein left the government to teach at the University of Virginia, and Alan Greenspan, who had joined the CEA only in July, became the new chair. Greenspan kept his post under Ford. A former jazz musician, he had earned an M.A. degree in economics at New York University.39 Like his early mentor Ayn Rand, Greenspan championed capitalism, opposing not only socialism and communism, but also the mixed economy, the bible of practices used by all Western governments after World War II.

The Great Divide: Unequal Societies and What We Can Do About Them by Joseph E. Stiglitz

"World Economic Forum" Davos, accelerated depreciation, accounting loophole / creative accounting, affirmative action, Affordable Care Act / Obamacare, agricultural Revolution, Alan Greenspan, Asian financial crisis, banking crisis, Bear Stearns, Berlin Wall, Bernie Madoff, Branko Milanovic, Bretton Woods, business cycle, capital controls, Capital in the Twenty-First Century by Thomas Piketty, carbon tax, Carmen Reinhart, carried interest, classic study, clean water, collapse of Lehman Brothers, collective bargaining, company town, computer age, corporate governance, credit crunch, Credit Default Swap, deindustrialization, Detroit bankruptcy, discovery of DNA, Doha Development Round, everywhere but in the productivity statistics, Fall of the Berlin Wall, financial deregulation, financial innovation, full employment, gentrification, George Akerlof, ghettoisation, Gini coefficient, glass ceiling, Glass-Steagall Act, global macro, global supply chain, Home mortgage interest deduction, housing crisis, income inequality, income per capita, information asymmetry, job automation, Kenneth Rogoff, Kickstarter, labor-force participation, light touch regulation, Long Term Capital Management, low interest rates, manufacturing employment, market fundamentalism, mass incarceration, moral hazard, mortgage debt, mortgage tax deduction, new economy, obamacare, offshore financial centre, oil shale / tar sands, Paul Samuelson, plutocrats, purchasing power parity, quantitative easing, race to the bottom, rent-seeking, rising living standards, Robert Solow, Ronald Reagan, Savings and loan crisis, school vouchers, secular stagnation, Silicon Valley, Simon Kuznets, subprime mortgage crisis, The Chicago School, the payments system, Tim Cook: Apple, too big to fail, trade liberalization, transaction costs, transfer pricing, trickle-down economics, Turing machine, unpaid internship, upwardly mobile, urban renewal, urban sprawl, very high income, War on Poverty, Washington Consensus, We are the 99%, white flight, winner-take-all economy, working poor, working-age population

. _________ THE ESSAYS IN this book are grouped into eight parts, each preceded by a short introductory essay, which attempts to explain the context in which the articles were written or touch upon a few of the topics that I was unable to address in the short confines of the articles reprinted here. I begin with “Prelude: Showing Cracks.” In the years before the crisis our economic leaders, including the Federal Reserve chairman Alan Greenspan, could boast of a new economy in which economic fluctuations that had been the scourge of the past would be put behind us; the so-called great moderation was bringing a new era of low inflation and seemingly high growth. But those who looked even a little bit more closely saw all of this as merely a thin veneer, masking economic mismanagement and political corruption on a massive scale (some of which had come to light in the Enron scandal); even worse, the growth that was occurring was not being shared by most Americans.

…

They illustrate a second theme to which I will return later in the book, and which has now been taken up by the International Monetary Fund (IMF), an organization not known for taking “radical” positions: inequality is associated with instability.10 The making of the 2008 crisis exemplifies how this happens: central banks create bubbles in response to a weakened economy born of growing inequality. The bubble eventually breaks and wreaks havoc on the economy. (Of course, the Fed should have been aware of this risk. But its leadership evinced an almost blind faith in markets and, like Bush, who had reappointed the Fed chair Alan Greenspan and later appointed the Fed chair Ben Bernanke—he had been his chief economic adviser—the institution appeared to pay little attention to the inequality that was growing day by day in the country.) At the same time, this illustrates a third theme: the role of politics. It is policies and politics that matter.

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During the Roaring 90s, many had believed that the Internet would transform everything. Productivity gains, which had averaged about 1.5 percent a year from the early 1970s through the early 90s, now approached 3 percent. During Bill Clinton’s second term, gains in manufacturing productivity sometimes even surpassed 6 percent. The Federal Reserve chairman, Alan Greenspan, spoke of a New Economy marked by continued productivity gains as the Internet buried the old ways of doing business. Others went so far as to predict an end to the business cycle. Greenspan worried aloud about how he’d ever be able to manage monetary policy once the nation’s debt was fully paid off.

The Revolt of the Public and the Crisis of Authority in the New Millennium by Martin Gurri

Affordable Care Act / Obamacare, Alan Greenspan, Albert Einstein, anti-communist, Arthur Eddington, Ayatollah Khomeini, bitcoin, Black Monday: stock market crash in 1987, Black Swan, Burning Man, business cycle, citizen journalism, Climategate, Climatic Research Unit, collective bargaining, creative destruction, crowdsourcing, currency manipulation / currency intervention, dark matter, David Graeber, death of newspapers, disinformation, Eddington experiment, en.wikipedia.org, Erik Brynjolfsson, facts on the ground, Francis Fukuyama: the end of history, Frederick Winslow Taylor, full employment, Great Leap Forward, housing crisis, income inequality, Intergovernmental Panel on Climate Change (IPCC), invention of writing, job-hopping, military-industrial complex, Mohammed Bouazizi, Nate Silver, Occupy movement, Port of Oakland, Republic of Letters, Ronald Reagan, scientific management, Skype, Steve Jobs, the scientific method, The Signal and the Noise by Nate Silver, too big to fail, traveling salesman, University of East Anglia, urban renewal, War on Poverty, We are the 99%, WikiLeaks, Yochai Benkler, young professional

Six years later, in early 2014, the afflicted economies had yet to recover from the wreckage of 2008 – and trust in economic experts had vanished, probably forever. My story, of course, concerns this shipwreck of the expert class rather than the crisis itself. A fitting place to start is with the life and times of Alan Greenspan, the man who transformed the economic expert into a glamorous, almost mythical figure. In 1987, President Ronald Reagan appointed Greenspan chairman of the Board of Governors of the Federal Reserve System – a portentous name for the central bank of the United States, usually called, without affection, “the Fed.”

…

Bob Woodward’s 2000 biography of the Fed chairman was titled Maestro, evoking the image of a genius conductor, leading the economy to a flawless performance with a wave of his baton. When, at the age of 79, Greenspan retired from the Fed in January 2006, an article in The Economist alluded to his “near god-like status” and observed that he was often called “the second most powerful person in the country.” “Alan Greenspan has dominated American economic policy for two decades,” the article reflected. “Who can fill his shoes and what will happen to the Federal Reserve once he is gone?”[124] Greenspan’s most significant achievement had been to persuade the elites and the public that the pursuit of material happiness required supervision by a brilliant specialist.

…

Given a measure of political power, transformed into an expert-bureaucrat, he would predict the economy’s trajectory and achieve outcomes beneficial to all – higher employment rates, say, or a more equitable distribution of income. That was the immanent faith manifested in the Fed’s mission. Those were the claims seemingly validated by the triumphant career of Alan Greenspan. And so we circle back to 2008. The blithe unawareness of the expert class as it drove the financial system over the brink, and the obvious confusion, often amounting to panic, with which it confronted the disaster, falsified in pain and loss its claims to competence. Every institution in the system failed catastrophically, beginning with Greenspan’s Fed, which encouraged a casino atmosphere by flooding the markets with easy money.

GDP: A Brief but Affectionate History by Diane Coyle

Alan Greenspan, Asian financial crisis, Berlin Wall, big-box store, Bletchley Park, Bretton Woods, BRICs, business cycle, clean water, computer age, conceptual framework, crowdsourcing, Diane Coyle, double entry bookkeeping, driverless car, en.wikipedia.org, endogenous growth, Erik Brynjolfsson, Fall of the Berlin Wall, falling living standards, financial intermediation, global supply chain, happiness index / gross national happiness, hedonic treadmill, income inequality, income per capita, informal economy, Johannes Kepler, John von Neumann, Kevin Kelly, Les Trente Glorieuses, Long Term Capital Management, Mahbub ul Haq, mutually assured destruction, Nathan Meyer Rothschild: antibiotics, new economy, Occupy movement, Phillips curve, purchasing power parity, Robert Shiller, Robert Solow, Ronald Reagan, shareholder value, Silicon Valley, Simon Kuznets, The Wealth of Nations by Adam Smith, Thorstein Veblen, University of East Anglia, working-age population

The new technologies were shaping up to outdo the Golden Age of the immediate postwar years if this continued. Suddenly, everyone was talking about the New Economy or the New Paradigm. The new technologies seemed to have made possible a lasting increase in the productivity of the economy. Prominent among the enthusiasts was Alan Greenspan, then the long-serving chairman of the Federal Reserve Board. His judgment about the economy’s potential growth rate was crucial because it was his job to use interest rates and monetary policy to choke off growth in demand that would prove inflationary. But there was no need to worry about inflation if the economy now had more potential to grow faster thanks to the new technologies, and therefore could easily satisfy the additional demand.

…

Consumer Price Index had been overstating the rate of inflation by 1.3 percentage points a year, and correspondingly understating real GDP growth by compensating for phantom price increases. What appeared to be rising prices (or less rapidly declining prices) in fact reflected massive improvements in quality and in the benefits consumers derived from these goods. The findings of the Boskin Commission gave Alan Greenspan and the Federal Reserve more confidence about the economy’s potential growth than they might otherwise have had. The other consequence of the commission’s report was that statistical agencies in the United States and elsewhere increasingly turned to the use of what is known as “hedonic” price indexes in calculating the general price index to turn dollar GDP figures into a real-terms measure.

…

Still, the continuing expansion of GDP in the developed world during the mid-2000s, as well as astoundingly rapid growth in the BRIC economies (Brazil, Russia, India, and China) and, to a lesser extent, in other emerging markets, fed the arrogance of the financial markets. There was said to be a “New Paradigm” of economic growth thanks to technology-driven increases in productivity. This was the era of books with titles like Dow 36,000 and what Alan Greenspan famously described as “irrational exuberance.”1 Some economists warned early that the bubble would end disastrously.2 Many more found it easier to assume that the buoyancy of financial markets would be sustained than to stick their necks out and predict economic cataclysm—it takes courage to stand out from the pack and make an extreme and unwelcome pronouncement.

The Alchemists: Three Central Bankers and a World on Fire by Neil Irwin

"World Economic Forum" Davos, Alan Greenspan, Ayatollah Khomeini, bank run, banking crisis, Bear Stearns, Berlin Wall, Bernie Sanders, break the buck, Bretton Woods, business climate, business cycle, capital controls, central bank independence, centre right, collapse of Lehman Brothers, collateralized debt obligation, credit crunch, currency peg, eurozone crisis, financial engineering, financial innovation, Flash crash, foreign exchange controls, George Akerlof, German hyperinflation, Google Earth, hiring and firing, inflation targeting, Isaac Newton, Julian Assange, low cost airline, low interest rates, market bubble, market design, middle-income trap, Money creation, money market fund, moral hazard, mortgage debt, new economy, Nixon triggered the end of the Bretton Woods system, Northern Rock, Paul Samuelson, price stability, public intellectual, quantitative easing, rent control, reserve currency, Robert Shiller, Robert Solow, rolodex, Ronald Reagan, Savings and loan crisis, savings glut, Socratic dialogue, sovereign wealth fund, The Great Moderation, too big to fail, union organizing, WikiLeaks, yield curve, Yom Kippur War

It was sheer luck that the Federal Reserve had a chairman so well prepared for the moment. Bernanke’s academic training as a monetary economist, particularly as a scholar of the Depression, hadn’t come up in his interview with President George W. Bush in the summer of 2005, when the native of tiny Dillon, South Carolina, was being considered to replace legendary Fed chair Alan Greenspan. But that background would influence his every action from that August Thursday on. Bernanke seemed almost haunted by the fear that he would make the same mistakes central bankers did in the 1920s and ’30s, which left mass human misery in their wake. Whatever their perceptions or prejudices, central bankers all have an awesome power: the ability to create and destroy money.

…

Benjamin Strong, the president of the New York Fed, led a secret meeting with Schacht, Norman, and Moreau’s deputy on a Long Island estate in 1927—but he pointedly didn’t invite anyone from the Board of Governors. He believed that managing international economic relationships was his sole concern. The position of chairman of the Board of Governors, later to be held by the likes of Alan Greenspan and Ben Bernanke, was viewed as so weak that Roy Young left the job in 1930 to become president of the Boston Fed. Strong died in 1928 and was replaced by George L. Harrison, a young, patrician lawyer. Harrison engineered a series of interventions during the October 1929 stock market crash, only to be overruled by his colleagues in Washington.

…

Lenders could be more comfortable about extending loans, confident that the money they were paid back would be worth something. And the Fed had gained credibility as a fighter of inflation, breaking the cycle in which it had become a self-fulfilling prophecy. Volcker’s achievement even made it easier for Alan Greenspan to maintain low and steady inflation; once people trusted that the Fed would do whatever it took to keep prices from spiraling out of control, it often took only a small interest rate move—or even mere words from the chairman—to rein in rising prices. The central bankers, having seen what can happen when they create too little money or too much, had seemed to learn their lessons, and a Goldilocks economy took hold in much of the world, a period of sustained prosperity and low inflation.

The Road to Ruin: The Global Elites' Secret Plan for the Next Financial Crisis by James Rickards

"World Economic Forum" Davos, Affordable Care Act / Obamacare, Alan Greenspan, Albert Einstein, asset allocation, asset-backed security, bank run, banking crisis, barriers to entry, Bayesian statistics, Bear Stearns, behavioural economics, Ben Bernanke: helicopter money, Benoit Mandelbrot, Berlin Wall, Bernie Sanders, Big bang: deregulation of the City of London, bitcoin, Black Monday: stock market crash in 1987, Black Swan, blockchain, Boeing 747, Bonfire of the Vanities, Bretton Woods, Brexit referendum, British Empire, business cycle, butterfly effect, buy and hold, capital controls, Capital in the Twenty-First Century by Thomas Piketty, Carmen Reinhart, cellular automata, cognitive bias, cognitive dissonance, complexity theory, Corn Laws, corporate governance, creative destruction, Credit Default Swap, cuban missile crisis, currency manipulation / currency intervention, currency peg, currency risk, Daniel Kahneman / Amos Tversky, David Ricardo: comparative advantage, debt deflation, Deng Xiaoping, disintermediation, distributed ledger, diversification, diversified portfolio, driverless car, Edward Lorenz: Chaos theory, Eugene Fama: efficient market hypothesis, failed state, Fall of the Berlin Wall, fiat currency, financial repression, fixed income, Flash crash, floating exchange rates, forward guidance, Fractional reserve banking, G4S, George Akerlof, Glass-Steagall Act, global macro, global reserve currency, high net worth, Hyman Minsky, income inequality, information asymmetry, interest rate swap, Isaac Newton, jitney, John Meriwether, John von Neumann, Joseph Schumpeter, junk bonds, Kenneth Rogoff, labor-force participation, large denomination, liquidity trap, Long Term Capital Management, low interest rates, machine readable, mandelbrot fractal, margin call, market bubble, Mexican peso crisis / tequila crisis, Minsky moment, Money creation, money market fund, mutually assured destruction, Myron Scholes, Naomi Klein, nuclear winter, obamacare, offshore financial centre, operational security, Paul Samuelson, Peace of Westphalia, Phillips curve, Pierre-Simon Laplace, plutocrats, prediction markets, price anchoring, price stability, proprietary trading, public intellectual, quantitative easing, RAND corporation, random walk, reserve currency, RFID, risk free rate, risk-adjusted returns, Robert Solow, Ronald Reagan, Savings and loan crisis, Silicon Valley, sovereign wealth fund, special drawing rights, stock buybacks, stocks for the long run, tech billionaire, The Bell Curve by Richard Herrnstein and Charles Murray, The Wealth of Nations by Adam Smith, The Wisdom of Crowds, theory of mind, Thomas Bayes, Thomas Kuhn: the structure of scientific revolutions, too big to fail, transfer pricing, value at risk, Washington Consensus, We are all Keynesians now, Westphalian system

Aftermath Complexity theory is not understood by regulators today, so perhaps LTCM partners can be forgiven for not understanding complexity in 1998. Yet once that collapse occurred, it might be expected that thought leaders in finance, like Alan Greenspan, Bob Rubin, and Larry Summers, would have learned lessons and tried to avoid a similar collapse in the future. They did just the opposite. In August 1998, as the LTCM debacle unfolded, Alan Greenspan was Federal Reserve chairman, Bob Rubin was treasury secretary, and Larry Summers was Rubin’s deputy, soon to be treasury secretary himself. In February 1999, just months after the LTCM catastrophe, Time magazine featured Greenspan, Rubin, and Summers on its cover with the headline “THE COMMITTEE TO SAVE THE WORLD.”

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The task was left to the Federal Reserve Bank of New York, which supervised the banks that stood to fail if LTCM defaulted. In an intense six-day period, September 23–28, 1998, Wall Street, under the watchful eye of the Fed, cobbled together a $4 billion bailout to stabilize the fund. Once the bailout was closed, Fed chair Alan Greenspan assisted the banks with an interest rate cut at a scheduled Federal Open Market Committee (FOMC) meeting on September 29, 1998. Still, markets did not stabilize. The newly recapitalized LTCM lost another half-billion dollars in a matter of days. Wall Street bailed out a hedge fund; now who would bail out Wall Street?

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Money was not anchored to gold; money was not even anchored to other money. Money had no anchor; in economists’ minds it did not need one. After 1974, money was what central banks said it was. A de facto dollar standard emerged from 1980 to 2010 at the direction of two Fed chairmen, Paul Volcker and Alan Greenspan, and two treasury secretaries, James Baker and Robert Rubin. U.S. growth in the 1980s and 1990s during Presidents Reagan, Bush 41, and Clinton was robust under this strong dollar standard. By 2010, with the weight of Bush 43 war spending and Obama deficits, the dollar standard dissolved into currency wars that have been raging ever since.

Rogue States by Noam Chomsky

"there is no alternative" (TINA), Alan Greenspan, anti-communist, Asian financial crisis, Berlin Wall, Branko Milanovic, Bretton Woods, business cycle, capital controls, classic study, collective bargaining, colonial rule, creative destruction, cuban missile crisis, declining real wages, deskilling, digital capitalism, Edward Snowden, experimental subject, Fall of the Berlin Wall, floating exchange rates, land reform, liberation theology, Mahbub ul Haq, Mikhail Gorbachev, Monroe Doctrine, new economy, Nixon triggered the end of the Bretton Woods system, no-fly zone, oil shock, precautionary principle, public intellectual, RAND corporation, Silicon Valley, strikebreaker, structural adjustment programs, Tobin tax, union organizing, Washington Consensus

Louis Uchitelle, “America’s Treadmill Economy: Going Nowhere Fast,” NYT, Money and Business section, March 8, 1998. 10. Alan Greenspan, testimony before the Senate Banking Committee, Feb. 1997: the “sustainable economic expansion” was thanks to “atypical restraint on compensation increases [which] appears to be mainly the consequence of greater worker insecurity.” 11. “Economic Report of the President,” Feb. 1997. Both this and the foregoing Greenspan quotation are cited in “Editorial,” Multinational Monitor, March 1997. 12. “Remarks by Alan Greenspan, Chairman, Board of Governors of the Federal Reserve System, at the Annual Convention of the American Society of Newspaper Editors, Washington, DC,” April 2, 1998. 13.

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King was surely smiling down on the gathering” at the annual King memorial, recognizing how Clinton had benefited “my little comer of southern Manhattan.”16 Other little comers fared somewhat differently. The fairy tale was attributed in part to “greater worker insecurity” by Federal Reserve Chair Alan Greenspan, citing a near-doubling of the proportion of workers fearing layoffs in large industries from 1991 to 1996. Other studies reveal that 90 percent of workers are concerned about job security. In a 1994 survey of working people, 79 percent of respondents said efforts to seek union representation are likely to lead to firing, and 41 percent of non-union workers said they think they might lose their own jobs if they tried to organize.

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More narrowly, the US Labor Department estimates that weakening of unions accounts for a large part of the stagnation or decline in real wages under the Reaganites, “a welcome development of transcendent importance,” as the Wall Street Journal described the fall in labor costs from the 1985 high to the lowest in the industrial world (UK aside).55 Testifying before the Senate Banking Committee in February 1997, Federal Reserve Board Chair Alan Greenspan was highly optimistic about “sustainable economic expansion” thanks to “atypical restraint on compensation increases [which] appears to be mainly the consequence of greater worker insecurity,” plainly a desideratum for a good society and yet another reason for Western relativists to reject Article 25 of the UD, with its “right to security.”

The Quants by Scott Patterson

Alan Greenspan, Albert Einstein, AOL-Time Warner, asset allocation, automated trading system, Bear Stearns, beat the dealer, Benoit Mandelbrot, Bernie Madoff, Bernie Sanders, Black Monday: stock market crash in 1987, Black Swan, Black-Scholes formula, Blythe Masters, Bonfire of the Vanities, book value, Brownian motion, buttonwood tree, buy and hold, buy low sell high, capital asset pricing model, Carl Icahn, centralized clearinghouse, Claude Shannon: information theory, cloud computing, collapse of Lehman Brothers, collateralized debt obligation, commoditize, computerized trading, Credit Default Swap, credit default swaps / collateralized debt obligations, diversification, Donald Trump, Doomsday Clock, Dr. Strangelove, Edward Thorp, Emanuel Derman, Eugene Fama: efficient market hypothesis, financial engineering, Financial Modelers Manifesto, fixed income, Glass-Steagall Act, global macro, Gordon Gekko, greed is good, Haight Ashbury, I will remember that I didn’t make the world, and it doesn’t satisfy my equations, index fund, invention of the telegraph, invisible hand, Isaac Newton, Jim Simons, job automation, John Meriwether, John Nash: game theory, junk bonds, Kickstarter, law of one price, Long Term Capital Management, Louis Bachelier, low interest rates, mandelbrot fractal, margin call, Mark Spitznagel, merger arbitrage, Michael Milken, military-industrial complex, money market fund, Myron Scholes, NetJets, new economy, offshore financial centre, old-boy network, Paul Lévy, Paul Samuelson, Ponzi scheme, proprietary trading, quantitative hedge fund, quantitative trading / quantitative finance, race to the bottom, random walk, Renaissance Technologies, risk-adjusted returns, Robert Mercer, Rod Stewart played at Stephen Schwarzman birthday party, Ronald Reagan, Savings and loan crisis, Sergey Aleynikov, short selling, short squeeze, South Sea Bubble, speech recognition, statistical arbitrage, The Chicago School, The Great Moderation, The Predators' Ball, too big to fail, transaction costs, value at risk, volatility smile, yield curve, éminence grise

The stock market was in the midst of one of the longest bull runs in history. The housing market was booming. Economists were full of talk of a Goldilocks economy—not too hot, not too cold—in which steady growth would continue as far as the eye could see. A brilliant Princeton economist, Ben Bernanke, had just taken over the helm of the Federal Reserve from Alan Greenspan. In February 2004, Bernanke had given a speech in Washington, D.C., that captured the buoyant mood of the times. Called “The Great Moderation,” the speech told of a bold new economic era in which volatility—the jarring jolts and spasms that wreaked havoc on people’s lives and their pocketbooks—was permanently eradicated.

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By early October, cracks were forming in the market that would turn into a full-blown earthquake. At the heart of the disaster: the quants and the Black-Scholes option-pricing formula. Sometime around midnight, October 19, 1987, Leo Melamed reached out a sweaty-palmed hand, picked up the phone in his nineteenth-floor office at the Chicago Mercantile Exchange, and dialed Alan Greenspan. The newly appointed chairman of the Federal Reserve, Greenspan was staying at the upscale Adolphus Hotel in Dallas to address the American Bankers Association’s annual convention the next day. It was to be his first major speech as chairman of the central bank. The speech would never happen.

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“Wilma, I am certain your customer is good for it,” Melamed pleaded. “You’re not going to let a stinking couple of hundred million dollars cause the Merc to go down the tubes, are you?” “Leo, my hands are tied.” “Please listen, Wilma. You have to take it upon yourself to guarantee the balance, because if you don’t, I’ve got to call Alan Greenspan, and we’re going to cause the next depression.” After a few moments of tense silence, Smelcer said, “Hold it a minute, Leo. Tom Theobald just walked in.” Theobald was chairman of Continental. After a few minutes, Smelcer was back. “Leo, we’re okay. Tom said go ahead. You’ve got your money.” It was 7:17 A.M., three minutes before the opening of the Merc’s currency markets.

Transaction Man: The Rise of the Deal and the Decline of the American Dream by Nicholas Lemann

"Friedman doctrine" OR "shareholder theory", "World Economic Forum" Davos, Abraham Maslow, Affordable Care Act / Obamacare, Airbnb, airline deregulation, Alan Greenspan, Albert Einstein, augmented reality, basic income, Bear Stearns, behavioural economics, Bernie Sanders, Black-Scholes formula, Blitzscaling, buy and hold, capital controls, Carl Icahn, computerized trading, Cornelius Vanderbilt, corporate governance, cryptocurrency, Daniel Kahneman / Amos Tversky, data science, deal flow, dematerialisation, diversified portfolio, Donald Trump, Elon Musk, Eugene Fama: efficient market hypothesis, Fairchild Semiconductor, financial deregulation, financial innovation, fixed income, future of work, George Akerlof, gig economy, Glass-Steagall Act, Henry Ford's grandson gave labor union leader Walter Reuther a tour of the company’s new, automated factory…, Ida Tarbell, index fund, information asymmetry, invisible hand, Irwin Jacobs, Joi Ito, Joseph Schumpeter, junk bonds, Kenneth Arrow, Kickstarter, life extension, Long Term Capital Management, Mark Zuckerberg, Mary Meeker, mass immigration, means of production, Metcalfe’s law, Michael Milken, money market fund, Mont Pelerin Society, moral hazard, Myron Scholes, Neal Stephenson, new economy, Norman Mailer, obamacare, PalmPilot, Paul Samuelson, Performance of Mutual Funds in the Period, Peter Thiel, price mechanism, principal–agent problem, profit maximization, proprietary trading, prudent man rule, public intellectual, quantitative trading / quantitative finance, Ralph Nader, Richard Thaler, road to serfdom, Robert Bork, Robert Metcalfe, rolodex, Ronald Coase, Ronald Reagan, Sand Hill Road, Savings and loan crisis, shareholder value, short selling, Silicon Valley, Silicon Valley ideology, Silicon Valley startup, Snow Crash, Social Responsibility of Business Is to Increase Its Profits, Steve Jobs, TaskRabbit, TED Talk, The Nature of the Firm, the payments system, the strength of weak ties, Thomas Kuhn: the structure of scientific revolutions, Thorstein Veblen, too big to fail, transaction costs, universal basic income, War on Poverty, white flight, working poor

Back in 1984, a former aide to Ronald Reagan named Edwin Gray, who was the head of the federal agency that regulated savings and loans, had begun warning publicly that deregulation had gone too far and was introducing too much risk into the system. This got him treated as an unreliable, misguided, disloyal eccentric, especially by members of his own party. Alan Greenspan, then a paid consultant to one of the most aggressive savings and loans, who was soon appointed chairman of the Federal Reserve Board, the most powerful job in financial regulation, wrote Gray a long, admonishing letter, pointing out that many savings and loans were posting record profits. (Of the seventeen savings and loans Greenspan mentioned by name in his letter, fifteen were out of business four years later.)

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He did this substantially by persuading voters that he understood the economic troubles of the middle class and knew how to fix them—in contrast to the Republicans, who were capable only of cheering the onward rush of the markets. He promised to cut taxes for the middle class and to pass an immediate economic stimulus program. When he accepted the Democratic nomination, he said he was doing so “in the name of the hardworking Americans who make up our forgotten middle class.” A few weeks after the election, Alan Greenspan, by now in his second term as chairman of the Federal Reserve, came to see Clinton at the Arkansas governor’s mansion. Greenspan gave Clinton a detailed argument for a quite different economic program than the one Clinton had run on: instead of a middle-class tax cut and a stimulus program, Clinton should focus on reducing the federal deficit that Reagan’s large tax cuts had created.

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They wanted to use markets to help people rather than to create countervailing institutional power to markets. As Bob Woodward put it, “Two or three decades ago, a great ideological chasm in economics had divided Republicans from Democrats, but now on many issues a consensus was emerging. No longer could Alan Greenspan be so easily distinguished from Bill Clinton.” Clinton himself was far less personally involved in economic policy during his second term than he had been at the outset of his presidency. Presidents necessarily ignore most of what goes on in their administrations, focusing on crises and disagreements that only they can settle.

The Conservative Nanny State: How the Wealthy Use the Government to Stay Rich and Get Richer by Dean Baker

accelerated depreciation, accounting loophole / creative accounting, affirmative action, Alan Greenspan, Asian financial crisis, Bretton Woods, business cycle, corporate governance, declining real wages, full employment, index fund, Jeff Bezos, low interest rates, McDonald's hot coffee lawsuit, medical malpractice, medical residency, money market fund, offshore financial centre, price discrimination, public intellectual, risk tolerance, spread of share-ownership

The Federal Reserve Board is one of the key nanny state tools for maintaining this imbalance. For this reason, it could have been included as a section in the last chapter. But the Fed, with its celebrity former chairman, the Maestro Alan Greenspan, is so important in this story that it deserves its own chapter. The Federal Reserve Board: What it Does and Who Does It Alan Greenspan had risen to rock star status by the end of his long reign as Federal Reserve Board chairman, but it is unlikely that most people had any clear idea of what he did. That is how the nanny state conservatives wanted it. While they are no doubt pleased that the public celebrate Mr.

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Until the late 1990s, the conventional wisdom among economists was that if the unemployment rate fell below a certain level (most economists put the level in a range between 5.8 percent and 6.4 percent unemployment), the inflation rate would begin to increase. Furthermore, they believed that the inflation would continue to increase as long as the unemployment rate remained below this safe range.7 Alan Greenspan acted under this belief in 1994 when he raised the federal funds rate by a full 3 percentage points in just over a year, from 3 percent in February of 1994 to 6 percent by March of 1995. At the time he began raising interest rates, there was very little evidence in the data of any problems with inflation.

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The implicit assumption is that there is roughly 1 percent counted as not being in the workforce who comes out of the woodworks to find a job for every person who goes from being unemployed to being employed. 10 In fact, at the time Greenspan had to overcome the opposition of Janet Yellen and Lawrence Meyers, the two most prominent economists on the Fed’s Board of Governors, in getting the Fed to keep interest rates low and allow unemployment to fall. 34 The Fed: Who Calls the Shots? While it can be hard to follow the mechanism through which the Fed affects the economy, it can be even harder to figure out who actually controls the policy at the Federal Reserve Board. The Federal Reserve Board chairman – currently Ben Bernanke, but Alan Greenspan for most of the last 18 years – has enormous power over the Fed’s policy decisions, but this is only part of the story. For the last quarter century, the Federal Reserve Board has been dominated by chairmen who came to be highly regarded in political circles and who were almost always able to get their way in determining the direction of Fed policy.

Capitalism in America: A History by Adrian Wooldridge, Alan Greenspan

"Friedman doctrine" OR "shareholder theory", "World Economic Forum" Davos, 2013 Report for America's Infrastructure - American Society of Civil Engineers - 19 March 2013, Affordable Care Act / Obamacare, agricultural Revolution, air freight, Airbnb, airline deregulation, Alan Greenspan, American Society of Civil Engineers: Report Card, Asian financial crisis, bank run, barriers to entry, Bear Stearns, Berlin Wall, Blitzscaling, Bonfire of the Vanities, book value, Bretton Woods, British Empire, business climate, business cycle, business process, California gold rush, Charles Lindbergh, cloud computing, collateralized debt obligation, collective bargaining, Corn Laws, Cornelius Vanderbilt, corporate governance, corporate raider, cotton gin, creative destruction, credit crunch, debt deflation, Deng Xiaoping, disruptive innovation, Donald Trump, driverless car, edge city, Elon Musk, equal pay for equal work, Everybody Ought to Be Rich, Fairchild Semiconductor, Fall of the Berlin Wall, fiat currency, financial deregulation, financial engineering, financial innovation, fixed income, Ford Model T, full employment, general purpose technology, George Gilder, germ theory of disease, Glass-Steagall Act, global supply chain, Great Leap Forward, guns versus butter model, hiring and firing, Ida Tarbell, income per capita, indoor plumbing, informal economy, interchangeable parts, invention of the telegraph, invention of the telephone, Isaac Newton, Jeff Bezos, jimmy wales, John Maynard Keynes: technological unemployment, Joseph Schumpeter, junk bonds, Kenneth Rogoff, Kitchen Debate, knowledge economy, knowledge worker, labor-force participation, land bank, Lewis Mumford, Louis Pasteur, low interest rates, low skilled workers, manufacturing employment, market bubble, Mason jar, mass immigration, McDonald's hot coffee lawsuit, means of production, Menlo Park, Mexican peso crisis / tequila crisis, Michael Milken, military-industrial complex, minimum wage unemployment, mortgage debt, Myron Scholes, Network effects, new economy, New Urbanism, Northern Rock, oil rush, oil shale / tar sands, oil shock, Peter Thiel, Phillips curve, plutocrats, pneumatic tube, popular capitalism, post-industrial society, postindustrial economy, price stability, Productivity paradox, public intellectual, purchasing power parity, Ralph Nader, Ralph Waldo Emerson, RAND corporation, refrigerator car, reserve currency, rising living standards, road to serfdom, Robert Gordon, Robert Solow, Ronald Reagan, Sand Hill Road, savings glut, scientific management, secular stagnation, Silicon Valley, Silicon Valley startup, Simon Kuznets, Social Responsibility of Business Is to Increase Its Profits, South Sea Bubble, sovereign wealth fund, stem cell, Steve Jobs, Steve Wozniak, strikebreaker, supply-chain management, The Great Moderation, The Rise and Fall of American Growth, The Wealth of Nations by Adam Smith, Thomas Malthus, Thorstein Veblen, too big to fail, total factor productivity, trade route, transcontinental railway, tulip mania, Tyler Cowen, Tyler Cowen: Great Stagnation, union organizing, Unsafe at Any Speed, Upton Sinclair, urban sprawl, Vannevar Bush, vertical integration, War on Poverty, washing machines reduced drudgery, Washington Consensus, white flight, wikimedia commons, William Shockley: the traitorous eight, women in the workforce, Works Progress Administration, Yom Kippur War, young professional

Jerome Karabel, The Chosen: The Hidden History of Admission and Exclusion at Harvard, Yale and Princeton (New York: Houghton Mifflin, 2005), 444. 14. Alan Greenspan, The Age of Turbulence: Adventures in a New World (London: Allen Lane, 2007), 169. Eleven. The Great Recession 1. Sebastian Mallaby, The Man Who Knew: The Life and Times of Alan Greenspan (New York: Penguin Press, 2016), 594. 2. Douglas A. Irwin, Clashing over Commerce: A History of U.S. Trade Policy (Chicago: University of Chicago Press, 2017), 666–67. 3. Alan Greenspan, The Map and the Territory 2.0: Risk, Human Nature, and the Future of Forecasting (New York: Penguin Press, 2013), 38. 4.

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ALSO BY ALAN GREENSPAN The Map and the Territory The Age of Turbulence ALSO BY ADRIAN WOOLDRIDGE The Great Disruption Masters of Management Measuring the Mind (WITH JOHN MICKLETHWAIT) The Fourth Revolution God Is Back The Right Nation The Company A Future Perfect The Witch Doctors PENGUIN PRESS An imprint of Penguin Random House LLC 375 Hudson Street New York, New York 10014 penguinrandomhouse.com Copyright © 2018 by Alan Greenspan Penguin supports copyright. Copyright fuels creativity, encourages diverse voices, promotes free speech, and creates a vibrant culture.

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Kennedy, Freedom from Fear: The American People in Depression and War, 1929–1945 (New York: Oxford University Press, 1999), 35. 4. Ibid., 41. 5. Ibid., 40. 6. Ron Chernow, The House of Morgan: An American Banking Dynasty and the Rise of Modern Finance (New York: Touchstone, 1990), 302. 7. Ibid., 346. 8. Alan Greenspan, The Map and the Territory 2.0: Risk, Human Nature, and the Future of Forecasting (New York: Penguin Press, 2013), 73–87. 9. Alan Greenspan, “The Crisis,” Brookings Papers on Economic Activity, Spring 2010. 10. Adam Cohen, Nothing to Fear: FDR’s Inner Circle and the Hundred Days That Created Modern America (New York: Penguin Press, 2009), 1. 11. Harold Cole and Lee Ohanian, “New Deal Policies and the Persistence of the Great Depression: A General Equilibrium Analysis,” Journal of Political Economy 112, no. 4 (August 2004): 779–816. 12.

Third World America: How Our Politicians Are Abandoning the Middle Class and Betraying the American Dream by Arianna Huffington

Alan Greenspan, American Society of Civil Engineers: Report Card, Apollo 13, Bear Stearns, Bernie Madoff, Bernie Sanders, call centre, carried interest, citizen journalism, clean water, collateralized debt obligation, Cornelius Vanderbilt, credit crunch, Credit Default Swap, credit default swaps / collateralized debt obligations, crony capitalism, David Brooks, do what you love, extreme commuting, Exxon Valdez, full employment, Glass-Steagall Act, greed is good, Greenspan put, guns versus butter model, high-speed rail, housing crisis, immigration reform, invisible hand, knowledge economy, laissez-faire capitalism, late fees, low interest rates, market bubble, market fundamentalism, Martin Wolf, medical bankruptcy, microcredit, military-industrial complex, Neil Armstrong, new economy, New Journalism, offshore financial centre, Ponzi scheme, post-work, proprietary trading, Report Card for America’s Infrastructure, Richard Florida, Ronald Reagan, Rosa Parks, Savings and loan crisis, single-payer health, smart grid, The Wealth of Nations by Adam Smith, Timothy McVeigh, too big to fail, transcontinental railway, trickle-down economics, winner-take-all economy, working poor, Works Progress Administration

Tocqueville’s “welfare of the greatest possible number” was replaced by the notion that the invisible hand of the free market could best determine society’s winners and losers—until, that is, the winners got into trouble in 2008 and the government rushed to the rescue in the name of preventing Armageddon. In books such as The Virtue of Selfishness and Atlas Shrugged, Ayn Rand, the high priestess of free-marketeers such as Alan Greenspan, championed the notion that by doing what is best for yourself, you end up doing what is best for everyone. But, as put into practice by corporate America over the past thirty years, that equation has been flipped upside down. It turns out that an unregulated free market is sooner or later corrupted by fraud and excess.

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William Seidman, the longtime GOP economic adviser who oversaw the savings and loan bailout in 1991, cuts to the chase: “[The Bush] administration made decisions that allowed the free market to operate as a barroom brawl instead of a prize fight.18 To make the market work well, you have to have a lot of rules.” Even Alan Greenspan, whose owl-eyed visage could adorn a Mount Rushmore of free-market capitalists, finally saw the light, telling a House committee in October 2008 that he “made a mistake in presuming that the self-interests of organizations, specifically banks and others, were such that they were best capable of protecting their own shareholders and their equity in the firms.”19 Many, including Bush 43, lay the blame on a few rotten apples: “Wall Street got drunk,” he said.20 Maybe so, but who made the Bush years a nonstop happy hour and kept serving up the drinks?

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Regulations are “very difficult to comply with,” and “so many of the laws” are “nonsensical,” in the words of Don Blankenship, the chief executive officer of Massey Energy, the company that owns the Upper Big Branch mine, which just happens to have a shocking history of safety violations.32 The Wall Street Journal cites the arguments of oil industry executives and regulators who claim “that offshore operations have become so complicated that regulators ultimately must rely on the oil companies and drilling contractors to proceed safely.”33 “There has been a very good record in deep water [drilling],” said Lars Herbst, head of the MMS’s Gulf of Mexico region, “up until the point of [the Deepwater Horizon] accident.”34 Other than that, Mrs. Lincoln, how did you enjoy the play? Similarly, the reason the financial industry can’t be regulated adequately is because, as Alan Greenspan put it during his 2010 testimony before the Financial Crisis Inquiry Commission, “the complexity is awesome,” and regulators “are reaching far beyond [their] capacities.”35 That is, of course, exactly the way Wall Street designed it. To the financial world, “awesome complexity” is a feature, not a bug.

Milton Friedman: A Biography by Lanny Ebenstein

Abraham Wald, affirmative action, Alan Greenspan, banking crisis, Berlin Wall, Bretton Woods, business cycle, classic study, Deng Xiaoping, Fall of the Berlin Wall, fiat currency, floating exchange rates, Francis Fukuyama: the end of history, full employment, Hernando de Soto, hiring and firing, inflation targeting, invisible hand, Joseph Schumpeter, Kenneth Arrow, Lao Tzu, liquidity trap, means of production, Modern Monetary Theory, Mont Pelerin Society, Myron Scholes, Pareto efficiency, Paul Samuelson, Phillips curve, Ponzi scheme, price stability, public intellectual, rent control, road to serfdom, Robert Bork, Robert Solow, Ronald Coase, Ronald Reagan, Sam Peltzman, school choice, school vouchers, secular stagnation, Simon Kuznets, stem cell, The Chicago School, The inhabitant of London could order by telephone, sipping his morning tea in bed, the various products of the whole earth, The Wealth of Nations by Adam Smith, Thorstein Veblen, zero-sum game

Many others who knew, were influenced by, or were students of Friedman participated in the Reagan administration as well as elsewhere in government, academia, and business. Friedman, Alan Greenspan, Shultz, Arthur Burns, Paul McCracken, Herb Stein, William Simon, Martin Anderson, and others served on the President’s Economic Policy Advisory Board during Reagan’s White House years. This group of outside economists met with the president regularly, particularly during his first term—as many as half a dozen times a year or so. Anderson provides these observations of Friedman and his influence in the context of discussing Reagan’s economic advisers: Perhaps those with the most influence were Milton Friedman, Alan Greenspan, and William Simon.... Reagan was especially taken with Milton Friedman.

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Among others at the lunch with President Bush and Milton and Rose were Vice President Richard Cheney and Federal Reserve Board chairman Alan Greenspan. At the dinner that night, Friedman, a few weeks short of his ninetieth birthday, appeared with Rose on the stage. As he rose to speak, the crowd of almost 2,000 political, business, and intellectual leaders stood to applaud him for his lifetime of contributions to the causes of human freedom and economic, political, and civil liberty. He celebrated his birthday at the University of Chicago a few weeks later, where the Department of Economics hosted him. Gary Becker writes that “no less an authority than...Alan Greenspan has indicated that Friedman’s emphasis on a stable monetary framework was instrumental in guiding central banks in Europe and the U.S. toward low inflation during the past two decades,” and that Friedman is “increasingly recognized as the most influential economist”19 of the twentieth century.

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To accomplish this goal, he recommends a fixed annual increase in the money supply, variously estimated (in part based on the money aggregates used) at 2 to 5 percent, about equal to long-term growth in the economy. He opposes discretionary manipulation of the money supply—a view that, in his call for inflation targeting, the new Federal Reserve chairman Ben Bernanke endorses more than his predecessor, Alan Greenspan, did. Friedman emphasizes the long-range benefits of a consistent monetary policy and stable aggregate prices. The quantity theory of money is, in Friedman’s view, a theory of the demand for money. If demand for money as an asset and for transactions were not relatively constant, then changes in the quantity of money would not have the effect on prices that they do have.

The Ascent of Money: A Financial History of the World by Niall Ferguson

Admiral Zheng, Alan Greenspan, An Inconvenient Truth, Andrei Shleifer, Asian financial crisis, asset allocation, asset-backed security, Atahualpa, bank run, banking crisis, banks create money, Bear Stearns, Black Monday: stock market crash in 1987, Black Swan, Black-Scholes formula, Bonfire of the Vanities, Bretton Woods, BRICs, British Empire, business cycle, capital asset pricing model, capital controls, Carmen Reinhart, Cass Sunstein, central bank independence, classic study, collateralized debt obligation, colonial exploitation, commoditize, Corn Laws, corporate governance, creative destruction, credit crunch, Credit Default Swap, credit default swaps / collateralized debt obligations, currency manipulation / currency intervention, currency peg, Daniel Kahneman / Amos Tversky, deglobalization, diversification, diversified portfolio, double entry bookkeeping, Edmond Halley, Edward Glaeser, Edward Lloyd's coffeehouse, equity risk premium, financial engineering, financial innovation, financial intermediation, fixed income, floating exchange rates, Fractional reserve banking, Francisco Pizarro, full employment, Future Shock, German hyperinflation, Greenspan put, Herman Kahn, Hernando de Soto, high net worth, hindsight bias, Home mortgage interest deduction, Hyman Minsky, income inequality, information asymmetry, interest rate swap, Intergovernmental Panel on Climate Change (IPCC), Isaac Newton, iterative process, James Carville said: "I would like to be reincarnated as the bond market. You can intimidate everybody.", John Meriwether, joint-stock company, joint-stock limited liability company, Joseph Schumpeter, junk bonds, Kenneth Arrow, Kenneth Rogoff, knowledge economy, labour mobility, Landlord’s Game, liberal capitalism, London Interbank Offered Rate, Long Term Capital Management, low interest rates, market bubble, market fundamentalism, means of production, Mikhail Gorbachev, Modern Monetary Theory, Money creation, money market fund, money: store of value / unit of account / medium of exchange, moral hazard, mortgage debt, mortgage tax deduction, Myron Scholes, Naomi Klein, National Debt Clock, negative equity, Nelson Mandela, Nick Bostrom, Nick Leeson, Northern Rock, Parag Khanna, pension reform, price anchoring, price stability, principal–agent problem, probability theory / Blaise Pascal / Pierre de Fermat, profit motive, quantitative hedge fund, RAND corporation, random walk, rent control, rent-seeking, reserve currency, Richard Thaler, risk free rate, Robert Shiller, rolling blackouts, Ronald Reagan, Savings and loan crisis, savings glut, seigniorage, short selling, Silicon Valley, South Sea Bubble, sovereign wealth fund, spice trade, stocks for the long run, structural adjustment programs, subprime mortgage crisis, tail risk, technology bubble, The Wealth of Nations by Adam Smith, The Wisdom of Crowds, Thomas Bayes, Thomas Malthus, Thorstein Veblen, tontine, too big to fail, transaction costs, two and twenty, undersea cable, value at risk, W. E. B. Du Bois, Washington Consensus, Yom Kippur War

Rather to his surprise, bond prices had risen in the wake of the previous November’s election, a movement that had actually preceded a speech by the president in which he pledged to reduce the federal deficit. ‘That investment market, they’re a tough crowd,’ observed Treasury Secretary Lloyd Bentsen. ‘Is this a credible effort [by the president]? Is the administration going to hang in there pushing it? They have so judged it.’ If bond prices continued to rally, said Federal Reserve Chairman Alan Greenspan, it would be ‘by far the most potent [economic] stimulus that I can imagine.’1 What could make public officials talk with such reverence, even awe, about a mere market for the buying and selling of government IOUs? After the creation of credit by banks, the birth of the bond was the second great revolution in the ascent of money.

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Yet, far from punishing this profligacy, the bond market has positively rewarded it. Between December 2000 and June 2003, the yield on ten-year Treasury bonds declined from 5.24 per cent to 3.33 per cent, and remains just above 4 per cent at the time of writing. It is, however, impossible to make sense of this ‘conundrum’ - as Alan Greenspan called this failure of bond yields to respond to short-term interest rate rises73 - by studying the bond market in isolation. We therefore turn now from the market for government debt to its younger and in many ways more dynamic sibling: the market for shares in corporate equity, known colloquially as the stock market. 3 Blowing Bubbles The Andes stretch for more than four thousand miles like a jagged, crooked spine down the western side of the South American continent.

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If we were all calculating machines we would simultaneously process all the available information and come to the same conclusion. But we are human beings, and as such are prone to myopia and to mood swings. When stock market prices surge upwards in sync, as they often do, it is as if investors are gripped by a kind of collective euphoria: what the former chairman of the Federal Reserve Alan Greenspan memorably called irrational exuberance.2 Conversely, when investors’ ‘animal spirits’ flip from greed to fear, the bubble of their earlier euphoria can burst with amazing suddenness. Zoological imagery is of course an integral part of stock market culture. Optimistic buyers of stocks are bulls, pessimistic sellers are bears.

The Crisis of Crowding: Quant Copycats, Ugly Models, and the New Crash Normal by Ludwig B. Chincarini

affirmative action, Alan Greenspan, asset-backed security, automated trading system, bank run, banking crisis, Basel III, Bear Stearns, Bernie Madoff, Black-Scholes formula, Bob Litterman, business cycle, buttonwood tree, Carmen Reinhart, central bank independence, collapse of Lehman Brothers, collateralized debt obligation, collective bargaining, corporate governance, correlation coefficient, Credit Default Swap, credit default swaps / collateralized debt obligations, currency risk, delta neutral, discounted cash flows, diversification, diversified portfolio, family office, financial engineering, financial innovation, financial intermediation, fixed income, Flash crash, full employment, Gini coefficient, Glass-Steagall Act, global macro, high net worth, hindsight bias, housing crisis, implied volatility, income inequality, interest rate derivative, interest rate swap, John Meriwether, Kickstarter, liquidity trap, London Interbank Offered Rate, Long Term Capital Management, low interest rates, low skilled workers, managed futures, margin call, market design, market fundamentalism, merger arbitrage, Mexican peso crisis / tequila crisis, Mitch Kapor, money market fund, moral hazard, mortgage debt, Myron Scholes, National best bid and offer, negative equity, Northern Rock, Occupy movement, oil shock, price stability, proprietary trading, quantitative easing, quantitative hedge fund, quantitative trading / quantitative finance, Ralph Waldo Emerson, regulatory arbitrage, Renaissance Technologies, risk free rate, risk tolerance, risk-adjusted returns, Robert Shiller, Ronald Reagan, Sam Peltzman, Savings and loan crisis, Sharpe ratio, short selling, sovereign wealth fund, speech recognition, statistical arbitrage, statistical model, survivorship bias, systematic trading, tail risk, The Great Moderation, too big to fail, transaction costs, value at risk, yield curve, zero-coupon bond

Michael Gelband: Managing Director and global head of fixed income who was asked to leave in 2007. Alberto Giovannini: Senior strategist at LTCM. Currently CEO and founder of Unifortune SGR. Ace Greenberg: Chairman of the Executive Committee of Bear Stearns during the financial crisis of 2008. CEO of Bear Stearns from 1978 to 1993. Alan Greenspan: Chairman of the Federal Reserve from 1987 to 2006. Joseph Gregory: President and Chief Operating Officer of Lehman Brothers up to the collapse. John Gutfreund: CEO of Salomon Brothers until 1991. Victor Haghani: Principal at LTCM and JWMP. Headed LTCM's London office and also very influential trader.

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The partners rejected the offer and proposed that all of LTCM’s bank creditors contribute capital to LTCM so it could continue to manage and liquidate the fund in an orderly fashion. This would be a better deal for banks, investors, the financial markets, and even LTCM’s partners. The Consortium Bailout This agreement was not a government bailout, in that Federal Reserve funds were neither provided nor ever even suggested. —Alan Greenspan, October 1, 1998 Testimony to the House The consortium bailout was among the most controversial aspects of LTCM’s collapse, but it was probably the wisest solution. Ten years later the market saw Lehman Brothers fail without a coordinated bailout. LTCM’s collapse perturbed the markets a bit, but they recovered quickly after the coordinated rescue.

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CHAPTER 9 The Bear Stearns Collapse Those of us who have looked to the self-interest of lending institutions to protect shareholders' equity, myself included, are in a state of shocked disbelief…Yes, I’ve found a flaw [in my ideology of free markets]. I don’t know how significant or permanent it is. But I’ve been very distressed by that fact. —Alan Greenspan, former Chairman of Federal Reserve, Congressional Testimony, October 28, 2008 A Brief History of the Bear Bear Stearns is widely considered one of the great small Wall Street firms (despite its location at 383 Madison Avenue in New York). The company was originally formed in 1923 by Joseph Bear, Robert Stearns, and Harold Mayer as an equity trading house.

Inflated: How Money and Debt Built the American Dream by R. Christopher Whalen

Alan Greenspan, Albert Einstein, bank run, banking crisis, Bear Stearns, Black Swan, book value, Bretton Woods, British Empire, business cycle, buy and hold, California gold rush, Carl Icahn, Carmen Reinhart, central bank independence, classic study, commoditize, conceptual framework, Cornelius Vanderbilt, corporate governance, corporate raider, creative destruction, cuban missile crisis, currency peg, debt deflation, falling living standards, fiat currency, financial deregulation, financial innovation, financial intermediation, floating exchange rates, Ford Model T, Fractional reserve banking, full employment, Glass-Steagall Act, global reserve currency, housing crisis, interchangeable parts, invention of radio, Kenneth Rogoff, laissez-faire capitalism, land bank, liquidity trap, low interest rates, means of production, military-industrial complex, Money creation, money: store of value / unit of account / medium of exchange, moral hazard, mutually assured destruction, Nixon triggered the end of the Bretton Woods system, non-tariff barriers, oil shock, Paul Samuelson, payday loans, plutocrats, price stability, pushing on a string, quantitative easing, rent-seeking, reserve currency, Ronald Reagan, Savings and loan crisis, special drawing rights, Suez canal 1869, Suez crisis 1956, The Chicago School, The Great Moderation, too big to fail, trade liberalization, transcontinental railway, Upton Sinclair, women in the workforce

Competition from Japan and Europe put the U.S. into an unaccustomed position of being a trade debtor. This caused many Americans to question whether the country was headed in the right direction. The added factor of runaway inflation, which had only been a problem in wartime, complicated the political equation in a new and unfamiliar way. President Nixon appointed Alan Greenspan as head of the Council of Economic Advisers in the summer of 1974, one of Nixon’s last significant official acts prior to his resignation. Greenspan made it clear to the Nixon staff that any resort to further price controls would trigger his departure as well. “He stayed on after Nixon resigned in 1974 and Gerald Ford assumed the presidency,” Bob Woodward wrote of Nixon during this period.

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Laxalt called me that Monday and thanked me for taking the initiative on this. And I thought is this the way these things always happen?33 Roger Kubarych noted that the group of Reagan conservatives who were in control of the administration by 1987, intended to get the Democrat Volcker next time. “And then we had 17 years of the good and the bad Alan Greenspan, Kubarych observed.” Volcker moved to protect his bureaucratic flank in 1984 when he nominated Gerald Corrigan as a replacement for Anthony Solomon as president at the New York Fed, an event that required almost as much lobbying as was later needed to block the appointment of Lee Hoskins to head the St.

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Real economic growth averaged 3.2 percent during the Reagan years versus 2.8 percent during the Ford–Carter years and 2.1 percent during the Bush–Clinton years, but this assumes that the inflation figures used to adjust the government’s nominal economic growth statistics are accurate. The major development during the 1990s under Fed Chairman Alan Greenspan would be the rise of private sector debt to levels not seen since the Great Depression. While the use of consumer debt had returned and grown in the 1950s, the use of debt by consumers and private businesses had been very restrained through the late 1970s. From 1947 through 1974, for example, total loans to consumers by all U.S. banks tracked by the Federal Reserve Board grew from $4 billion to just under $100 billion.

Capitalism: the unknown ideal by Ayn Rand

Alan Greenspan, Albert Einstein, anti-communist, Berlin Wall, British Empire, business cycle, data science, East Village, Ford Model T, Ford paid five dollars a day, full employment, Isaac Newton, laissez-faire capitalism, means of production, minimum wage unemployment, profit motive, the market place, trade route, transcontinental railway, urban renewal, War on Poverty, yellow journalism

., p. 114. 22 Ibid. 23 I am indebted to Ayn Rand for her identification of this principle. See her “Notes on the History of American Free Enterprise” (chapter 7). 24 Alan Greenspan, “Stock Prices and Capital Evaluation.” Paper delivered before a joint session of the American Statistical Association and the American Finance Association on December 27, 1959. 25 For a detailed analysis of this correlation, see Alan Greenspan, “Business Investment Decisions and Full Employment Models,” American Statistical Association, 1961 Proceedings of the Business and Economic Statistics Section. 26 See chapter 4. 27 See, in this connection, Carl Snyder, Capitalism the Creator, New York: The Macmillan Company, 1940. 28 See Benjamin M.

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., Registered Offices: 80 Strand, London WC2R 0RL, England Published by Signet, an imprint of New American Library, a division of Penguin Group (USA) Inc. Previously published in a New American Library edition. First Signet Printing, November Copyright © Ayn Rand, 1946, 1962, 1964, 1966 Copyright © The Objectivist Newsletter, Inc., 1962, 1963, 1964, 1965 Copyright © The Objectivist, Inc., 1966, 1967 Copyright © Alan Greenspan, 1962 All rights reserved Permission requests for college or textbook use should be addressed to the Estate of Ayn Rand, PO Box 51808, Irving, California 92619-9930. Information about other books by Ayn Rand and her philosophy, Objectivism, may be obtained by writing to OBJECTIVISM, PO Box 51808, Irvine, California 92619-9930.

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Those who are interested in studying political economy will find, in the appendix, a recommended bibliography on that subject. Now a word about the contributors to this book. Robert Hessen is presently completing his doctorate in history at Columbia University, and is teaching in Columbia’s Graduate School of Business. Alan Greenspan is president of Townsend-Greenspan & Co., Inc., economic consultants. —AYN RAND New York, July 1966 P.S. Nathaniel Branden is no longer associated with me, with my philosophy or with The Objectivist. A.R. New York, November 1970 Theory and History 1. WHAT IS CAPITALISM? by Ayn Rand The disintegration of philosophy in the nineteenth century and its collapse in the twentieth have led to a similar, though much slower and less obvious, process in the course of modern science.

Arguing With Zombies: Economics, Politics, and the Fight for a Better Future by Paul Krugman

affirmative action, Affordable Care Act / Obamacare, Alan Greenspan, Andrei Shleifer, antiwork, Asian financial crisis, bank run, banking crisis, basic income, behavioural economics, benefit corporation, Berlin Wall, Bernie Madoff, bitcoin, blockchain, bond market vigilante , Bonfire of the Vanities, business cycle, capital asset pricing model, carbon footprint, carbon tax, Carmen Reinhart, central bank independence, centre right, Climategate, cognitive dissonance, cryptocurrency, David Ricardo: comparative advantage, different worldview, Donald Trump, Edward Glaeser, employer provided health coverage, Eugene Fama: efficient market hypothesis, fake news, Fall of the Berlin Wall, fiat currency, financial deregulation, financial innovation, financial repression, frictionless, frictionless market, fudge factor, full employment, green new deal, Growth in a Time of Debt, hiring and firing, illegal immigration, income inequality, index fund, indoor plumbing, invisible hand, it is difficult to get a man to understand something, when his salary depends on his not understanding it, job automation, John Snow's cholera map, Joseph Schumpeter, Kenneth Rogoff, knowledge worker, labor-force participation, large denomination, liquidity trap, London Whale, low interest rates, market bubble, market clearing, market fundamentalism, means of production, Modern Monetary Theory, New Urbanism, obamacare, oil shock, open borders, Paul Samuelson, plutocrats, Ponzi scheme, post-truth, price stability, public intellectual, quantitative easing, road to serfdom, Robert Gordon, Robert Shiller, Ronald Reagan, secular stagnation, Seymour Hersh, stock buybacks, The Chicago School, The Great Moderation, the map is not the territory, The Wealth of Nations by Adam Smith, trade liberalization, transaction costs, universal basic income, very high income, We are all Keynesians now, working-age population

When people issue ominous warnings about the cost of Medicare after 2077, my question is, Why should fiscal decisions today reflect the possible cost of providing generations not yet born with medical treatments not yet invented? The biggest risk now facing Social Security is political. Will those who hate the system use scare tactics and fuzzy math to bring it down? After Alan Greenspan’s call for cuts in Social Security benefits, Republican members of Congress declared that the answer is to create private retirement accounts. It’s amazing that they are still peddling this snake oil; it’s even more amazing that journalists continue to let them get away with it. Yesterday in The Wall Street Journal, a writer judiciously declared that “personal accounts alone won’t cure Social Security’s ills.”

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There’s nothing strange or mysterious about how Social Security works: it’s just a government program supported by a dedicated tax on payroll earnings, just as highway maintenance is supported by a dedicated tax on gasoline. Right now the revenues from the payroll tax exceed the amount paid out in benefits. This is deliberate, the result of a payroll tax increase—recommended by none other than Alan Greenspan—two decades ago. His justification at the time for raising a tax that falls mainly on lower- and middle-income families, even though Ronald Reagan had just cut the taxes that fall mainly on the very well-off, was that the extra revenue was needed to build up a trust fund. This could be drawn on to pay benefits once the baby boomers began to retire.

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Robert Shiller, who argued against such rationalizations and correctly called the stock bubble in his book Irrational Exuberance, has added an ominous analysis of the housing market to the new edition, and says the housing bubble “may be the biggest bubble in U.S. history.” In parts of the country there’s a speculative fever among people who shouldn’t be speculators that seems all too familiar from past bubbles—the shoeshine boys with stock tips in the 1920s, the beer-and-pizza joints showing CNBC, not ESPN, on their TV sets in the 1990s. Even Alan Greenspan now admits that we have “characteristics of bubbles” in the housing market, but only “in certain areas.” And it’s true that the craziest scenes are concentrated in a few regions, like coastal Florida and California. But these aren’t tiny regions; they’re big and wealthy, so that the national housing market as a whole looks pretty bubbly.

The Dollar Meltdown: Surviving the Coming Currency Crisis With Gold, Oil, and Other Unconventional Investments by Charles Goyette

Alan Greenspan, bank run, banking crisis, Bear Stearns, Ben Bernanke: helicopter money, Berlin Wall, Bernie Madoff, Bretton Woods, British Empire, Buckminster Fuller, business cycle, buy and hold, California gold rush, currency manipulation / currency intervention, Deng Xiaoping, diversified portfolio, Elliott wave, fiat currency, fixed income, Fractional reserve banking, housing crisis, If something cannot go on forever, it will stop - Herbert Stein's Law, index fund, junk bonds, Lao Tzu, low interest rates, margin call, market bubble, McMansion, Money creation, money market fund, money: store of value / unit of account / medium of exchange, mortgage debt, National Debt Clock, oil shock, peak oil, pushing on a string, reserve currency, rising living standards, road to serfdom, Ronald Reagan, Saturday Night Live, short selling, Silicon Valley, transaction costs

Regulating the nation’s supply of money and credit, the Fed was the primary engine of the mortgage debacle. It was full steam ahead as it cut interest rates an astonishing thirteen consecutive times between January 2001 and May 2003, pushing the Fed funds rate all the way down from 6.5 percent to 1 percent, where it was left for a year! Of course Bernanke voted with then-Fed chairman Alan Greenspan on the cuts. In fact, in the 11-1 vote of the Fed’s Open Market Committee to drop rates to 1 percent, the lone dissenter actually wanted a bigger cut. At 1 percent interest, the real rate of interest, that is, the nominal rate minus inflation, was below zero. The effects of the contrived low rates were several.

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Like a nagging home economics teacher, the prime minister instructed British subjects to take more care storing fruit and vegetables to reduce waste. But thirty-four years earlier President Ford had taken his campaign to the limit of credulity, urging Americans to be sure to send for their WIN (“Whip Inflation Now”) buttons! Years later, in his autobiography, Alan Greenspan, eventually to become Federal Reserve chairman, but at the time the chairman of Ford’s Council of Economic Advisers, described thinking how “unbelievably stupid” the WIN program was. Nice of him to speak out a generation too late. The next president, Jimmy Carter, thought to appoint a “chief inflation fighter.”

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It is a powerful device for steering a country along any chosen course and as such is incompatible with the very idea of self-government and a free people. 3. From its shadowy beginnings until today, the Federal Reserve has been cloaked in secrecy. This secrecy conceals its hidden beneficiaries, and obscures the costs paid by the people. Foreshadowing the mortgage meltdown fifteen years later, Fed chairman Alan Greenspan drove interest rates down sharply in the early 1990s, with an eye to providing cheap liquidity to the banking sector. It was good for the likes of Merrill Lynch, JPMorgan, and Chase Manhattan, which saw their depressed stock prices take off, but it had a costly impact on Americans. Driving rates to 3 percent by the time he was finished, Greenspan fundamentally altered the investment outlook and risk-taking proclivities of retired people and baby boomers alike, as they sought to make up in the stock market for the certificate of deposit and fixed income returns that had disappeared.

The Age of Turbulence: Adventures in a New World (Hardback) - Common by Alan Greenspan

addicted to oil, air freight, airline deregulation, Alan Greenspan, Albert Einstein, asset-backed security, bank run, Berlin Wall, Black Monday: stock market crash in 1987, Bretton Woods, business cycle, business process, buy and hold, call centre, capital controls, carbon tax, central bank independence, collateralized debt obligation, collective bargaining, compensation consultant, conceptual framework, Corn Laws, corporate governance, corporate raider, correlation coefficient, cotton gin, creative destruction, credit crunch, Credit Default Swap, credit default swaps / collateralized debt obligations, crony capitalism, cuban missile crisis, currency peg, currency risk, Deng Xiaoping, Dissolution of the Soviet Union, Doha Development Round, double entry bookkeeping, equity premium, everywhere but in the productivity statistics, Fall of the Berlin Wall, fiat currency, financial innovation, financial intermediation, full employment, Gini coefficient, Glass-Steagall Act, Hernando de Soto, income inequality, income per capita, information security, invisible hand, Joseph Schumpeter, junk bonds, labor-force participation, laissez-faire capitalism, land reform, Long Term Capital Management, low interest rates, Mahatma Gandhi, manufacturing employment, market bubble, means of production, Mikhail Gorbachev, moral hazard, mortgage debt, Myron Scholes, Nelson Mandela, new economy, North Sea oil, oil shock, open economy, open immigration, Pearl River Delta, pets.com, Potemkin village, price mechanism, price stability, Productivity paradox, profit maximization, purchasing power parity, random walk, Reminiscences of a Stock Operator, reserve currency, Right to Buy, risk tolerance, Robert Solow, Ronald Reagan, Savings and loan crisis, shareholder value, short selling, Silicon Valley, special economic zone, stock buybacks, stocks for the long run, Suez crisis 1956, the payments system, The Theory of the Leisure Class by Thorstein Veblen, The Wealth of Nations by Adam Smith, Thorstein Veblen, Tipper Gore, too big to fail, total factor productivity, trade liberalization, trade route, transaction costs, transcontinental railway, urban renewal, We are all Keynesians now, working-age population, Y2K, zero-sum game

The Fed, of course, had been lowering rates for over a year, but the White House wanted more, faster cuts. 120 More ebooks visit: http://www.ccebook.cn ccebook-orginal english ebooks This file was collected by ccebook.cn form the internet, the author keeps the copyright. PHOTOGRAPHIC INSERT 1 Age five, Washington Heights, New York City, 1931. The collection of Alan Greenspan More ebooks visit: http://www.ccebook.cn ccebook-orginal english ebooks This file was collected by ccebook.cn form the internet, the author keeps the copyright. W i t h three cousins on the Greenspan side, circa 1934 (I'm on the left). The collection of Alan Greenspan Sixteen years old, Lake Hiawatha, New Jersey. The collection of Alan Greenspan My father, who sold stocks on Wall Street, left my mother when I was two. When I was nine, he gave me a copy of his book, Recovery Ahead!

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Penguin Books (South Africa) (Pty) Ltd, 24 Sturdee Avenue, Rosebank, Johannesburg 2196, South Africa Penguin Books Ltd, Registered Offices: 80 Strand, London WC2R 0RL, England First published in 2007 by The Penguin Press, a member of Penguin Group (USA) Inc. Copyright © Alan Greenspan, 2007 All rights reserved Library of Congress Cataloging-in-Publication Data Greenspan, Alan, 1926The age of turbulence : adventures in a new world / by Alan Greenspan. p. cm. Includes bibliographical references and index. ISBN: 1-4295-4652-2 1. Greenspan, Alan, 1926- 2. Government economists—United States—Biography. 3. United States—Economic conditions—1945- I.Title HB119.G74A3 2007 332.1'1092—dc22 [B] 2007013169 Designed by Amanda Dewey Without limiting the rights under copyright reserved above, no part of this publication may be reproduced, stored in or introduced into a retrieval system, or transmitted, in any form or by any means (electronic, mechanical, photocopying, recording, or otherwise), without the prior written permission of both the copyright owner and the above publisher of this book.

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After a year at the Juilliard School, I toured the country as a sideman with the Henry Jerome dance band, playing saxophone and clarinet (I'm sitting at far left). I also did tax returns for the band members. Courtesy of Henry Jerome Music With my mother, Rose Goldsmith, a brave and lively woman who gave me my love of music. The collection of Alan Greenspan By 1950,1 was earning enough as an economist to think about leaving New York City for the suburbs, which I did just over a year later. The collection of Alan Greenspan More ebooks visit: http://www.ccebook.cn ccebook-orginal english ebooks This file was collected by ccebook.cn form the internet, the author keeps the copyright. Of all my teachers, Arthur Burns and Ayn Rand had the greatest impact on my life.

Unfinished Business by Tamim Bayoumi

Alan Greenspan, algorithmic trading, Asian financial crisis, bank run, banking crisis, Basel III, battle of ideas, Bear Stearns, behavioural economics, Ben Bernanke: helicopter money, Berlin Wall, Big bang: deregulation of the City of London, book value, Bretton Woods, British Empire, business cycle, buy and hold, capital controls, Celtic Tiger, central bank independence, collapse of Lehman Brothers, collateralized debt obligation, credit crunch, currency manipulation / currency intervention, currency peg, Doha Development Round, facts on the ground, Fall of the Berlin Wall, financial deregulation, floating exchange rates, full employment, Glass-Steagall Act, Greenspan put, hiring and firing, housing crisis, inflation targeting, junk bonds, Just-in-time delivery, Kenneth Rogoff, liberal capitalism, light touch regulation, London Interbank Offered Rate, Long Term Capital Management, market bubble, Martin Wolf, moral hazard, oil shale / tar sands, oil shock, price stability, prisoner's dilemma, profit maximization, quantitative easing, race to the bottom, random walk, reserve currency, Robert Shiller, Rubik’s Cube, Savings and loan crisis, savings glut, technology bubble, The Great Moderation, The Myth of the Rational Market, the payments system, The Wisdom of Crowds, too big to fail, trade liberalization, transaction costs, value at risk

Gorton and Ordoñez (2013): Gary Gorton and Guillermo Ordoñez, “The Supply and Demand for Safe Assets”, NBER Working Paper No. 18732, January 2013. Greene (2005): Brian Greene, The Fabric of the Cosmos: Space, Time, and the Texture of Reality, Vintage Books, New York, 2005. Greenspan (1996): Alan Greenspan, “Bank Supervision in a World Economy”, speech given at the International Conference of Banking Supervisors, Stockholm, June 13, 1996, available from the Federal Reserve website. Greenspan (2008): Alan Greenspan, The Age of Turbulence: Adventures in a New World, Penguin Books, London, 2008. Haldane (2009): Andrew Haldane, “Banking on the State”, BIS Economic Review No. 139, 2009. Hale and Obstfeld (2016): Galina Hale and Maurice Obstfeld, “The Euro and the Geography of International Debt Flows”, Journal of the European Economic Association, Vol. 14, No. 1 (February 2016), pp. 115–44.

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The important question is why the Basel Committee decided to farm out the calculation of capital buffers to large banks. Here, a crucial role was played by the growing belief that market discipline would constrain risk-taking. This was largely driven by views coming from the United States. The major US banks had been at the forefront of developing value-at-risk models. In addition, Alan Greenspan, Chair of the Federal Reserve, and the Fed staff in charge of bank regulation were strong believers in the power of market discipline in controlling the risks taken by investment banks. This is made clear in Greenspan’s memoirs, sent to the printers just before the North Atlantic crisis and titled (with unintended irony) The Age of Turbulence, where he wrote about his experience at the Fed that: Since I was an outlier in my libertarian opposition to most [financial] regulation, I planned to be largely passive in such matters and allow the Federal Reserve governors to take the lead .  . . . 

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They saw private monitoring of risk by investors and government monitoring through regulation as alternatives rather than complements. In particular, they were concerned that stronger government oversight of investment banks could be potentially counterproductive as it might reduce the incentives of investors to monitor risk-taking. As Alan Greenspan stated in a speech in 1996: On the other hand, if central banks or governments effectively insulate private institutions from the largest potential losses, however incurred, increased laxity could be costly to society as well. Leverage could escalate to the outer edge of prudence, if not beyond.

Paper Promises by Philip Coggan

accounting loophole / creative accounting, activist fund / activist shareholder / activist investor, Alan Greenspan, balance sheet recession, bank run, banking crisis, barriers to entry, Bear Stearns, Berlin Wall, Bernie Madoff, Black Monday: stock market crash in 1987, Black Swan, bond market vigilante , Bretton Woods, British Empire, business cycle, call centre, capital controls, Carmen Reinhart, carried interest, Celtic Tiger, central bank independence, collapse of Lehman Brothers, collateralized debt obligation, credit crunch, Credit Default Swap, credit default swaps / collateralized debt obligations, currency manipulation / currency intervention, currency peg, currency risk, debt deflation, delayed gratification, diversified portfolio, eurozone crisis, Fall of the Berlin Wall, falling living standards, fear of failure, financial innovation, financial repression, fixed income, floating exchange rates, full employment, German hyperinflation, global reserve currency, Goodhart's law, Greenspan put, hiring and firing, Hyman Minsky, income inequality, inflation targeting, Isaac Newton, John Meriwether, joint-stock company, junk bonds, Kenneth Rogoff, Kickstarter, labour market flexibility, Les Trente Glorieuses, light touch regulation, Long Term Capital Management, low interest rates, manufacturing employment, market bubble, market clearing, Martin Wolf, Minsky moment, Money creation, money market fund, money: store of value / unit of account / medium of exchange, moral hazard, mortgage debt, Myron Scholes, negative equity, Nick Leeson, Northern Rock, oil shale / tar sands, paradox of thrift, peak oil, pension reform, plutocrats, Ponzi scheme, price stability, principal–agent problem, purchasing power parity, quantitative easing, QWERTY keyboard, railway mania, regulatory arbitrage, reserve currency, Robert Gordon, Robert Shiller, Ronald Reagan, savings glut, short selling, South Sea Bubble, sovereign wealth fund, special drawing rights, Suez crisis 1956, The Chicago School, The Great Moderation, The inhabitant of London could order by telephone, sipping his morning tea in bed, the various products of the whole earth, The Wealth of Nations by Adam Smith, time value of money, too big to fail, trade route, tulip mania, value at risk, Washington Consensus, women in the workforce, zero-sum game

On 19 October 1987, the Dow fell by almost 23 per cent in one day (Black Monday as it became known). Share prices round the world followed suit, from London to Hong Kong. No economic or political event seemed to be to blame. At the time, it seemed eerily reminiscent of the crash of 1929, the event popularly assumed to have ushered in the Great Depression. Central banks, led by Alan Greenspan, the chairman of the US Federal Reserve, resolved to head off this calamity. They vowed to lend money to any bank or broker who had been caught out by this sudden plunge in prices. And they cut interest rates in order to encourage spending, discourage saving and make owning shares look more attractive than holding cash.

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‘I used to think if there was reincarnation, I wanted to come back as the president or the pope or a .400 baseball hitter,’ he said. ‘But now I want to come back as the bond market. You can intimidate everybody.’16 That was in the 1990s. By the following decade, the vigilantes seem to have fallen asleep. Alan Greenspan even talked of a bond-market ‘conundrum’: as the Fed pushed up the cost of borrowing over the short term, bond yields (effectively the cost of borrowing long term) actually fell. The explanation for this conundrum seems to be that the nature of bond-market investors had changed. No longer was the tone set by professional fund managers, scouring the world for the best combination of risk and return.

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It is like a cancer that is growing to infinite size until it takes over the entire body.’18 EFFICIENT-MARKET THEORY The reluctance of central banks to intervene in asset bubbles owed something to the feeling of euphoria induced by higher asset prices. Central bankers did not wish to lose their much-cherished independence by alienating the public. However, the main motivation was ideology. Alan Greenspan, the head of the US Federal Reserve, was a disciple of Ayn Rand, a philosopher and cult novelist whose ‘objectivism’ glorified the elite at the expense of the dull masses and interfering bureaucrats. Howard Roark, the hero of her novel The Fountainhead, is an architect whose ambition to create modernist buildings is frustrated by lesser beings.

The Age of Stagnation: Why Perpetual Growth Is Unattainable and the Global Economy Is in Peril by Satyajit Das

"there is no alternative" (TINA), "World Economic Forum" Davos, 9 dash line, accounting loophole / creative accounting, additive manufacturing, Airbnb, Alan Greenspan, Albert Einstein, Alfred Russel Wallace, Anthropocene, Anton Chekhov, Asian financial crisis, banking crisis, Bear Stearns, Berlin Wall, bitcoin, bond market vigilante , Bretton Woods, BRICs, British Empire, business cycle, business process, business process outsourcing, call centre, capital controls, Capital in the Twenty-First Century by Thomas Piketty, carbon tax, Carmen Reinhart, Clayton Christensen, cloud computing, collaborative economy, colonial exploitation, computer age, creative destruction, cryptocurrency, currency manipulation / currency intervention, David Ricardo: comparative advantage, declining real wages, Deng Xiaoping, deskilling, digital divide, disintermediation, disruptive innovation, Downton Abbey, Emanuel Derman, energy security, energy transition, eurozone crisis, financial engineering, financial innovation, financial repression, forward guidance, Francis Fukuyama: the end of history, full employment, geopolitical risk, gig economy, Gini coefficient, global reserve currency, global supply chain, Goldman Sachs: Vampire Squid, Great Leap Forward, Greenspan put, happiness index / gross national happiness, high-speed rail, Honoré de Balzac, hydraulic fracturing, Hyman Minsky, illegal immigration, income inequality, income per capita, indoor plumbing, informal economy, Innovator's Dilemma, intangible asset, Intergovernmental Panel on Climate Change (IPCC), it is difficult to get a man to understand something, when his salary depends on his not understanding it, It's morning again in America, Jane Jacobs, John Maynard Keynes: technological unemployment, junk bonds, Kenneth Rogoff, Kevin Roose, knowledge economy, knowledge worker, Les Trente Glorieuses, light touch regulation, liquidity trap, Long Term Capital Management, low interest rates, low skilled workers, Lyft, Mahatma Gandhi, margin call, market design, Marshall McLuhan, Martin Wolf, middle-income trap, Mikhail Gorbachev, military-industrial complex, Minsky moment, mortgage debt, mortgage tax deduction, new economy, New Urbanism, offshore financial centre, oil shale / tar sands, oil shock, old age dependency ratio, open economy, PalmPilot, passive income, peak oil, peer-to-peer lending, pension reform, planned obsolescence, plutocrats, Ponzi scheme, Potemkin village, precariat, price stability, profit maximization, pushing on a string, quantitative easing, race to the bottom, Ralph Nader, Rana Plaza, rent control, rent-seeking, reserve currency, ride hailing / ride sharing, rising living standards, risk/return, Robert Gordon, Robert Solow, Ronald Reagan, Russell Brand, Satyajit Das, savings glut, secular stagnation, seigniorage, sharing economy, Silicon Valley, Simon Kuznets, Slavoj Žižek, South China Sea, sovereign wealth fund, Stephen Fry, systems thinking, TaskRabbit, The Chicago School, The Great Moderation, The inhabitant of London could order by telephone, sipping his morning tea in bed, the various products of the whole earth, the market place, the payments system, The Spirit Level, Thorstein Veblen, Tim Cook: Apple, too big to fail, total factor productivity, trade route, transaction costs, uber lyft, unpaid internship, Unsafe at Any Speed, Upton Sinclair, Washington Consensus, We are the 99%, WikiLeaks, Y2K, Yom Kippur War, zero-coupon bond, zero-sum game

Apologists for the new economic model argued that the experience of Japan confirmed the superiority of the more flexible, competitive, and dynamic market models of the US, and others like them, for delivering growth. The Great Moderation was really a Goldilocks economy, reliant on a massive expansion in debt and financial speculation, underwritten by the Greenspan Put. This referred to a practice originated by US Fed chairman Alan Greenspan, and adopted widely, whereby in a financial crisis central banks lowered interest rates sharply and flooded the system with money, to prevent asset prices from falling and to avert potential deterioration in economic activity. The severing of the link between money and gold allowed central banks greater flexibility to adjust the supply of money.

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Under certain assumptions, they found that the loss could be higher—US$25 trillion. We may never know the full cost. The GFC and its aftermath, known as the Great Recession, was the most serious financial crisis since the Great Depression of the 1930s. On September 18, 2008, at the height of the crisis, Ben Bernanke, Alan Greenspan's successor at the Fed, made the case for a massive bank bailout to skeptical legislators: “If we don't do this, we may not have an economy on Monday.”7 Three years earlier, during an interview on financial news channel CNBC, Bernanke had stated: “We've never had a decline in house prices on a nationwide basis….

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In the age of capital, there was no longer a society, just the economy and the mirages of personal wealth—the value of your home, and the stock market, which affected your savings and investments. Presiding over it all were economic officials and central bankers. The influence of economic policymakers was directly related to postwar prosperity, which they claimed was the result of their prudent stewardship. Alan Greenspan, a master of politics and public relations, succeeded in making the US Fed chairman the second most powerful person on the planet, after PotUS (President of the United States). Feted as rock stars at the annual Davos World Economic Forum, their every gnomic utterance was reported reverently in the media and meticulously parsed by analysts.

Hubris: Why Economists Failed to Predict the Crisis and How to Avoid the Next One by Meghnad Desai

3D printing, Alan Greenspan, bank run, banking crisis, Bear Stearns, Berlin Wall, Big bang: deregulation of the City of London, Bretton Woods, BRICs, British Empire, business cycle, Capital in the Twenty-First Century by Thomas Piketty, Carmen Reinhart, central bank independence, collapse of Lehman Brothers, collateralized debt obligation, correlation coefficient, correlation does not imply causation, creative destruction, Credit Default Swap, credit default swaps / collateralized debt obligations, David Ricardo: comparative advantage, deindustrialization, demographic dividend, Eugene Fama: efficient market hypothesis, eurozone crisis, experimental economics, Fall of the Berlin Wall, financial innovation, Financial Instability Hypothesis, floating exchange rates, full employment, German hyperinflation, Glass-Steagall Act, Gunnar Myrdal, Home mortgage interest deduction, imperial preference, income inequality, inflation targeting, invisible hand, Isaac Newton, Joseph Schumpeter, Kenneth Arrow, Kenneth Rogoff, laissez-faire capitalism, liquidity trap, Long Term Capital Management, low interest rates, market bubble, market clearing, means of production, Meghnad Desai, Mexican peso crisis / tequila crisis, mortgage debt, Myron Scholes, negative equity, Northern Rock, oil shale / tar sands, oil shock, open economy, Paul Samuelson, Phillips curve, Post-Keynesian economics, price stability, purchasing power parity, pushing on a string, quantitative easing, reserve currency, rising living standards, risk/return, Robert Shiller, Robert Solow, Ronald Reagan, savings glut, secular stagnation, seigniorage, Silicon Valley, Simon Kuznets, subprime mortgage crisis, The Chicago School, The Great Moderation, The inhabitant of London could order by telephone, sipping his morning tea in bed, the various products of the whole earth, The Wealth of Nations by Adam Smith, Tobin tax, too big to fail, women in the workforce

Keynes, The General Theory of Employment, Interest and Money (1936), in The Collected Writings of John Maynard Keynes, vol. 7 (Macmillan, London, 1978), pp. 158–9. 5.Many books describe and analyze the crisis in detail. See Andrew Ross Sorkin, Too Big to Fail (Viking, New York, 2009); Raghuram Rajan, Fault Lines: How Hidden Fractures Still Threaten the World Economy (Princeton University Press, Princeton, NJ, 2010). 6.Alan Greenspan’s testimony to the Senate Committee on Oversight and Government Reform, US House of Representatives, October 23, 2008. See also Alan Greenspan, The Age of Turbulence, with a new epilogue (Penguin, New York, 2008). 7.Financial Services Authority, The Turner Review: A Regulatory Response to the Global Banking Crisis (Financial Services Authority, London, 2009), p. 39. 8.The case for the Keynesians is argued by Robert Skidelsky, Keynes: The Return of the Master (Penguin, London, 2009). 9.Milton Friedman and Anna Schwartz, A Monetary History of the United States 1867–1960 (Princeton University Press, Princeton, NJ, 1963). 10.For the background to the euro, see David Marsh, The Euro: The Battle for the New Global Currency (Yale University Press, New Haven, CT, 2009). 7 The Search for an Answer 1.Thomas Piketty, Capital in the Twenty-First Century (Belknap Press, Cambridge, MA, 2014), see figure 6.1, p. 200; figure 6.2, p. 201; figure 8.5, p. 291. 2.Meghnad Desai, “An Econometric Model of the Share of Wages in National Income: UK 1855–1965” (1984), republished in The Selected Essays of Meghnad Desai, vol. 1: Macroeconomics and Monetary Theory (Edward Elgar, Cheltenham, 1995). 3.Andrew Glyn and Robert Sutcliffe, “The Collapse of UK Profits,” New Left Review, 66 (Mar.

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An Economic Crisis or a Crisis of Economics? Economics as a profession had been riding high in the eyes of the world. Economists were said to have the answers to all sorts of problems. Before the crisis, economic bestsellers such as Freakonomics (2005) showcased the power of economics to solve many social as well as economic problems. Alan Greenspan, former Chairman of the Federal Reserve, in his memoirs The Age of Turbulence drew a picture of a superman figure dominating the economy to whose charge he was appointed. Indeed many people in public life and most citizens believed economists had the tools to prevent events such as the Great Depression of the 1930s from reoccurring.

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Most developed countries had some regulatory institutions for financial and commodity markets. But the pace of innovation in the financial markets was fast. There was also the ideological pressure to leave markets alone as they were held to be working perfectly based on the efficient market hypothesis and rational expectations. Regulators themselves believed in these truths, as Alan Greenspan later testified when the crisis had hit. Thus regulatory systems failed en masse to either foresee or give effective forewarning about the coming crisis. There was also the growth of consumer credit as a result of companies issuing debit and credit cards. Credit cards were first introduced to provide financial security to individuals traveling for business purposes.

Toward Rational Exuberance: The Evolution of the Modern Stock Market by B. Mark Smith

Alan Greenspan, bank run, banking crisis, book value, business climate, business cycle, buy and hold, capital asset pricing model, compound rate of return, computerized trading, Cornelius Vanderbilt, credit crunch, cuban missile crisis, discounted cash flows, diversified portfolio, Donald Trump, equity risk premium, Eugene Fama: efficient market hypothesis, financial independence, financial innovation, fixed income, full employment, Glass-Steagall Act, income inequality, index arbitrage, index fund, joint-stock company, junk bonds, locking in a profit, Long Term Capital Management, Louis Bachelier, low interest rates, margin call, market clearing, merger arbitrage, Michael Milken, money market fund, Myron Scholes, Paul Samuelson, price stability, prudent man rule, random walk, Richard Thaler, risk free rate, risk tolerance, Robert Bork, Robert Shiller, Ronald Reagan, scientific management, shareholder value, short selling, stocks for the long run, the market place, transaction costs

These included the consistent growth of corporate earnings, a 25% tax rate for long-term capital gains (considerably below the tax rate applied to bond interest income), and built-in stabilizers in government, such as Social Security and unemployment insurance, which, combined with contracyclical monetary and fiscal policies, had presumably made severe economic downturns less likely (and stocks less risky). Fortune did present cautionary opinions. A young economic consultant named Alan Greenspan of Townsend-Greenspan Financial Advisors, Inc., warned that the booming stock market itself could ultimately be the cause of economic dislocations. He said that the Fed’s ability to pursue contracyclical monetary policies to restrain speculative excess in the market was limited by the fact that the tight money required would have the side effect of paralyzing legitimate business.

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The long-term secular trend toward higher market valuations that had characterized the years since 1920 (interrupted by the Depression) continued, and accelerated, in the 1980s. By mid-1987, stock price valuations (adjusted for interest rates) were the highest they had ever been. Dow Jones Industrial Average, 1980–1989 © Dow Jones & Company Inc. 15 AN ACCIDENT WAITING TO HAPPEN WHEN RONALD REAGAN appointed Alan Greenspan chairman of the Federal Reserve Board in 1987, critics openly questioned whether Greenspan was up to the job. The retiring chairman, Paul Volker, had attained near-legendary status by successfully vanquishing inflation. Greenspan lacked stature in comparison to Volker; some critics also questioned whether he was too close to Reagan to be truly independent.

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Almost without exception, the banks, scared by the day’s events, refused to lend more money, even though they had long-standing relationships with the firms in question. Suddenly the specialists, and many dealers, were confronted with the shocking possibility that they might be forced to default, bringing the entire New York Stock Exchange market-making mechanism down with them. During the market’s late-afternoon collapse, Alan Greenspan was on an airplane en route to a speaking engagement in Dallas. At the time he departed from Washington, the Dow Industrials had been down 200 points but appeared to be stabilizing. Immediately after disembarking in Dallas, Greenspan inquired as to how the market had finally closed. When told the Dow had ended down “five-oh-eight,” he at first breathed a sigh of relief, assuming the response meant 5.08 points.

The New Depression: The Breakdown of the Paper Money Economy by Richard Duncan

Alan Greenspan, asset-backed security, bank run, banking crisis, banks create money, Bear Stearns, Ben Bernanke: helicopter money, Bretton Woods, business cycle, currency manipulation / currency intervention, debt deflation, deindustrialization, diversification, diversified portfolio, fiat currency, financial innovation, Flash crash, Fractional reserve banking, Glass-Steagall Act, income inequality, inflation targeting, It's morning again in America, Joseph Schumpeter, laissez-faire capitalism, liquidity trap, low interest rates, market bubble, market fundamentalism, mass immigration, megaproject, Mexican peso crisis / tequila crisis, Money creation, money market fund, money: store of value / unit of account / medium of exchange, mortgage debt, Nixon triggered the end of the Bretton Woods system, private sector deleveraging, quantitative easing, reserve currency, risk free rate, Ronald Reagan, savings glut, special drawing rights, The Great Moderation, too big to fail, trade liberalization

Financial Account Balance, 1970 to 2007 Source: IMF From 1971 to 2007, total foreign exchange reserves increased by $6.7 trillion. Over the same period, the surplus on the U.S. financial account amounted to $6.3 trillion. The former funded the latter. Such a large surplus on the U.S. financial account could not have occurred had central banks outside the United States not created so much fiat money. Alan Greenspan and Ben Bernanke have frequently attempted to explain the massive surplus on the U.S. financial account by blaming a global savings glut and by citing the overwhelming attractiveness of the U.S. financial markets relative to those elsewhere. The true explanation is that a dozen or so central banks have printed nearly $7 trillion worth of fiat money between 1971 and 2007 (and $3 trillion more subsequently) in order to manipulate the value of their currencies so as to achieve strong export-led growth.

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Personal consumption expenditure makes up approximately 70 percent of U.S. GDP. The business sector sells to the household sector; and the financial sector lends to it. Therefore, the financial health of the household sector determines the health of the entire economy. Will this sector take on more debt in the years immediately ahead? Former Fed Chairman Alan Greenspan wrote about household sector debt in his autobiography, which went to print in June 2007. He began by quoting from an article published in Fortune magazine in 1956: “Consumer short-term debt . . . is approaching a historical turning point . . . It must soon adjust itself to the nation’s capacity for going in hock, which is not limitless,” declared Fortune in March 1956.

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EXHIBIT 6.3 Ratio of Household Debt to Disposable Personal Income Source: Federal Reserve, Flow of Funds Accounts of the United States, second quarter 2011, Table B.100 Notice that this ratio had hit 53 percent and was rising rapidly at the time Fortune expressed concern about mortgage debt in 1956. Then, from the mid-1960s to the mid-1980s it flattened out around 70 percent. Alan Greenspan became Fed chairman in August 1987. Soon thereafter, household debt relative to disposable income began to rise sharply. That ratio peaked at nearly 140 percent in 2007, just as Greenspan was expounding on the role of rising debt and the facts of life. Unfortunately, American households were incapable of repaying so much debt.

Chaos Kings: How Wall Street Traders Make Billions in the New Age of Crisis by Scott Patterson

"World Economic Forum" Davos, 2021 United States Capitol attack, 4chan, Alan Greenspan, Albert Einstein, asset allocation, backtesting, Bear Stearns, beat the dealer, behavioural economics, Benoit Mandelbrot, Bernie Madoff, Bernie Sanders, bitcoin, Bitcoin "FTX", Black Lives Matter, Black Monday: stock market crash in 1987, Black Swan, Black Swan Protection Protocol, Black-Scholes formula, blockchain, Bob Litterman, Boris Johnson, Brownian motion, butterfly effect, carbon footprint, carbon tax, Carl Icahn, centre right, clean tech, clean water, collapse of Lehman Brothers, Colonization of Mars, commodity super cycle, complexity theory, contact tracing, coronavirus, correlation does not imply causation, COVID-19, Credit Default Swap, cryptocurrency, Daniel Kahneman / Amos Tversky, decarbonisation, disinformation, diversification, Donald Trump, Doomsday Clock, Edward Lloyd's coffeehouse, effective altruism, Elliott wave, Elon Musk, energy transition, Eugene Fama: efficient market hypothesis, Extinction Rebellion, fear index, financial engineering, fixed income, Flash crash, Gail Bradbrook, George Floyd, global pandemic, global supply chain, Gordon Gekko, Greenspan put, Greta Thunberg, hindsight bias, index fund, interest rate derivative, Intergovernmental Panel on Climate Change (IPCC), Jeff Bezos, Jeffrey Epstein, Joan Didion, John von Neumann, junk bonds, Just-in-time delivery, lockdown, Long Term Capital Management, Louis Bachelier, mandelbrot fractal, Mark Spitznagel, Mark Zuckerberg, market fundamentalism, mass immigration, megacity, Mikhail Gorbachev, Mohammed Bouazizi, money market fund, moral hazard, Murray Gell-Mann, Nick Bostrom, off-the-grid, panic early, Pershing Square Capital Management, Peter Singer: altruism, Ponzi scheme, power law, precautionary principle, prediction markets, proprietary trading, public intellectual, QAnon, quantitative easing, quantitative hedge fund, quantitative trading / quantitative finance, Ralph Nader, Ralph Nelson Elliott, random walk, Renaissance Technologies, rewilding, Richard Thaler, risk/return, road to serfdom, Ronald Reagan, Ronald Reagan: Tear down this wall, Rory Sutherland, Rupert Read, Sam Bankman-Fried, Silicon Valley, six sigma, smart contracts, social distancing, sovereign wealth fund, statistical arbitrage, statistical model, stem cell, Stephen Hawking, Steve Jobs, Steven Pinker, Stewart Brand, systematic trading, tail risk, technoutopianism, The Chicago School, The Great Moderation, the scientific method, too big to fail, transaction costs, University of East Anglia, value at risk, Vanguard fund, We are as Gods, Whole Earth Catalog

Financial and economic collapses can lead to surprising outcomes in the political and social spheres—the election of Barack Obama, the rise of the ultra-conservative Tea Party in 2010, and the 2016 election of Donald Trump are arguably traceable to the Global Financial Crisis of 2008, which itself was (arguably) caused by unprecedented monetary stimulus from Alan Greenspan’s Federal Reserve in response to the September 11, 2001, terrorist attack in America. British historian and economist Adam Tooze coined a term for the converging, expanding risks the world faces—the polycrisis. It’s a world in which pandemics, inflation, recession, the climate crisis, nuclear escalation, and other risks combine to magnify harm via a series of vicious feedback loops.

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Derivatives had another trait that made the quants giddy: Their growth was theoretically infinite. A company could only issue so many bonds, but a bank could sell a limitless number of derivative contracts linked to a single basket of bonds or commodity. As the economy gained strength, Federal Reserve chairman Alan Greenspan began to fret about inflation. Slowly at first, he started cranking up short-term rates to stifle growth, dealing incremental pain to bond investors (as interest rates rise, the value of bonds declines). By August, the Fed had boosted rates nearly two percentage points. Then, in November, Greenspan swung for the fences: a staggering three-quarters of a percentage point increase, bringing the federal funds rate to 5 ½ percent.

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A cousin called and said the police were outside his building at 72nd Street and First Avenue. Someone had jumped to their death from their upper-floor apartment. “It hit close to home,” Taleb said later. While other traders had suffered enormous pain that day, Taleb’s portfolio had fared relatively well. But it wasn’t career-making. That changed the following day, when Alan Greenspan at the Federal Reserve injected vast amounts of cash into the financial system. Taleb’s positions in Eurodollars shot to the moon. Contracts he’d bought for $2 or $3 were selling for $300, $400, $500. At the desk, he felt he was losing his mind as he watched his positions rip higher. He knew what was happening should not be happening.

Never Let a Serious Crisis Go to Waste: How Neoliberalism Survived the Financial Meltdown by Philip Mirowski

"there is no alternative" (TINA), Adam Curtis, Alan Greenspan, Alvin Roth, An Inconvenient Truth, Andrei Shleifer, asset-backed security, bank run, barriers to entry, Basel III, Bear Stearns, behavioural economics, Berlin Wall, Bernie Madoff, Bernie Sanders, Black Swan, blue-collar work, bond market vigilante , bread and circuses, Bretton Woods, Brownian motion, business cycle, capital controls, carbon credits, Carmen Reinhart, Cass Sunstein, central bank independence, cognitive dissonance, collapse of Lehman Brothers, collateralized debt obligation, complexity theory, constrained optimization, creative destruction, credit crunch, Credit Default Swap, credit default swaps / collateralized debt obligations, crony capitalism, dark matter, David Brooks, David Graeber, debt deflation, deindustrialization, democratizing finance, disinformation, do-ocracy, Edward Glaeser, Eugene Fama: efficient market hypothesis, experimental economics, facts on the ground, Fall of the Berlin Wall, financial deregulation, financial engineering, financial innovation, Flash crash, full employment, George Akerlof, Glass-Steagall Act, Goldman Sachs: Vampire Squid, Greenspan put, Hernando de Soto, housing crisis, Hyman Minsky, illegal immigration, income inequality, incomplete markets, information asymmetry, invisible hand, Jean Tirole, joint-stock company, junk bonds, Kenneth Arrow, Kenneth Rogoff, Kickstarter, knowledge economy, l'esprit de l'escalier, labor-force participation, liberal capitalism, liquidity trap, loose coupling, manufacturing employment, market clearing, market design, market fundamentalism, Martin Wolf, money market fund, Mont Pelerin Society, moral hazard, mortgage debt, Naomi Klein, Nash equilibrium, night-watchman state, Northern Rock, Occupy movement, offshore financial centre, oil shock, Pareto efficiency, Paul Samuelson, payday loans, Philip Mirowski, Phillips curve, Ponzi scheme, Post-Keynesian economics, precariat, prediction markets, price mechanism, profit motive, public intellectual, quantitative easing, race to the bottom, random walk, rent-seeking, Richard Thaler, road to serfdom, Robert Shiller, Robert Solow, Ronald Coase, Ronald Reagan, Savings and loan crisis, savings glut, school choice, sealed-bid auction, search costs, Silicon Valley, South Sea Bubble, Steven Levy, subprime mortgage crisis, tail risk, technoutopianism, The Chicago School, The Great Moderation, the map is not the territory, The Myth of the Rational Market, the scientific method, The Theory of the Leisure Class by Thorstein Veblen, The Wisdom of Crowds, theory of mind, Thomas Kuhn: the structure of scientific revolutions, Thorstein Veblen, Tobin tax, tontine, too big to fail, transaction costs, Tyler Cowen, vertical integration, Vilfredo Pareto, War on Poverty, Washington Consensus, We are the 99%, working poor

In an op-ed article in the Financial Times, Rajan defended the upside of financial speculation, blaming the harmful fallout on the Congress and the Fed for distorting market incentives. Elsewhere, the Stanford economist Gregory Rosston was quoted as saying, “I don’t think (recent events are) necessarily a repudiation of the Chicago School of economics as personified by Alan Greenspan, but it definitely shows there is some role for regulation in society.” Actually, all that was revealed was the unabashed ignorance of history on the part of Rosston, since Alan Greenspan was never a member in good standing of the Chicago School, but rather an acolyte of the Ayn Rand cult, who had been awarded a belated PhD by NYU in 1977 after serving as chairman of the Council of Economic Advisors under Gerald Ford, and who subsequently parlayed numerous right-wing political connections into elevation to his position as chairman of the Federal Reserve from 1987 to 2006.

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Perusing the papers from the New York conference, however, one finds instead mostly predictable platitudes and tired retreads about the wicked government causing the crisis.10 Deepak Lal raised an interesting question in his keynote address: why did the crisis occur when so many “Friends of the MPS” like Alan Greenspan and Jean-Claude Trichet were in charge of the world financial system, and hinted they may not have leaned sufficiently in favor of “Sound Money.” Niall Ferguson rallied the troops with the catechism that it must have been regulation that caused the crisis, and not some failure of the market economy, while also exploring his personal theme that somehow China might be to blame.

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Lusting for scapegoats, journalists initially scoured the landscape for miscreants like Bernie Madoff, Dick Fuld, and Joseph Cassano; and then instinctively turned to find their counterparts inside the economics profession. There was even an online ballot for receipt of the Ignoble (or “Dynamite”) Prize, to be awarded to three economists deemed to have contributed the most to the global financial collapse. (The winners were Alan Greenspan, Milton Friedman, and Larry Summers.) Of course, there existed no equivalent of the Justice Department or the Securities and Exchange Commission to actually police the economists, just as there was no phalanx of gumshoes and DAs to do the hard investigative work; and thus it dawned upon some that (unlike medicine, and even sociology) there was not even a professional code of ethics to which bona fide economists were enjoined to subscribe.

Propaganda and the Public Mind by Noam Chomsky, David Barsamian

"World Economic Forum" Davos, Alan Greenspan, Albert Einstein, AOL-Time Warner, Asian financial crisis, Bretton Woods, business cycle, capital controls, deindustrialization, digital divide, European colonialism, experimental subject, Howard Zinn, Hyman Minsky, interchangeable parts, language acquisition, liberation theology, Martin Wolf, one-state solution, precautionary principle, public intellectual, Ralph Nader, RAND corporation, school vouchers, Silicon Valley, structural adjustment programs, Thomas L Friedman, Tobin tax, Washington Consensus

For this one, the headline was, “America Is Prosperous and Smug.”14 As I went to England on May 3, the front-page story in the Week in Review in the Times was something about “America is fat and happy.”15 It’s all about the fairy-tale boom, how Americans are so confident and prosperous and everything is so wonderful. We can ask the same question: Who are they talking about? Is it the roughly two-thirds of Americans whose wages and incomes have either stagnated or declined in the last twenty-five years? Are they the ones who are smug and prosperous and confident or the ones who Alan Greenspan, the chairman of the Federal Reserve Board, is talking about when he attributes the fairy-tale economic boom to what he calls “worker insecurity,” since workers are so intimidated that they won’t ask for a raise, which is a great thing for the health of the economy because you can drive down wages and make profits high?

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If they had opened up markets in the 1980s, superior Japanese products would have flooded the automotive industry, steel, and semiconductors. The main industrial base of the U.S. would have been wiped out. So the Reagan administration just barred imports. What’s more, it poured public funds into industry. So, despite all the rhetoric about free markets,” you see regular state intervention in the U.S. economy. Alan Greenspan just gave a speech in which he talked about the enormous achievements of market capitalism and consumer choice. He gave a list of examples.23 The Internet was the main one. It was developed by the Pentagon. It was developed for thirty years at public expense, with most of the ideas, initiatives and creativity, the hardware, and the technology.

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But it’s drowned in a chorus of deceit. And unless something is done about it, this very effective program will be destroyed. There’s plenty wrong with Social Security, like the fact that it’s regressively funded, which should be changed. But the problems are not the ones that are being discussed. Alan Greenspan was critical of Clinton’s plan to invest in the stock market. He said he was fearful that the assets might be used for political ends.30 Greenspan wants the program to be even worse. I think Clinton’s plan is a bad one. For one thing, it’s based on faulty assumptions. But at least it has the property that risk is spread in some way.

Other People's Money: Masters of the Universe or Servants of the People? by John Kay

Affordable Care Act / Obamacare, Alan Greenspan, asset-backed security, bank run, banking crisis, Basel III, Bear Stearns, behavioural economics, Bernie Madoff, Big bang: deregulation of the City of London, bitcoin, Black Monday: stock market crash in 1987, Black Swan, Bonfire of the Vanities, bonus culture, book value, Bretton Woods, buy and hold, call centre, capital asset pricing model, Capital in the Twenty-First Century by Thomas Piketty, cognitive dissonance, Cornelius Vanderbilt, corporate governance, Credit Default Swap, cross-subsidies, currency risk, dematerialisation, disinformation, disruptive innovation, diversification, diversified portfolio, Edward Lloyd's coffeehouse, Elon Musk, Eugene Fama: efficient market hypothesis, eurozone crisis, financial engineering, financial innovation, financial intermediation, financial thriller, fixed income, Flash crash, forward guidance, Fractional reserve banking, full employment, George Akerlof, German hyperinflation, Glass-Steagall Act, Goldman Sachs: Vampire Squid, Greenspan put, Growth in a Time of Debt, Ida Tarbell, income inequality, index fund, inflation targeting, information asymmetry, intangible asset, interest rate derivative, interest rate swap, invention of the wheel, Irish property bubble, Isaac Newton, it is difficult to get a man to understand something, when his salary depends on his not understanding it, James Carville said: "I would like to be reincarnated as the bond market. You can intimidate everybody.", Jim Simons, John Meriwether, junk bonds, light touch regulation, London Whale, Long Term Capital Management, loose coupling, low cost airline, M-Pesa, market design, Mary Meeker, megaproject, Michael Milken, millennium bug, mittelstand, Money creation, money market fund, moral hazard, mortgage debt, Myron Scholes, NetJets, new economy, Nick Leeson, Northern Rock, obamacare, Occupy movement, offshore financial centre, oil shock, passive investing, Paul Samuelson, Paul Volcker talking about ATMs, peer-to-peer lending, performance metric, Peter Thiel, Piper Alpha, Ponzi scheme, price mechanism, proprietary trading, purchasing power parity, quantitative easing, quantitative trading / quantitative finance, railway mania, Ralph Waldo Emerson, random walk, reality distortion field, regulatory arbitrage, Renaissance Technologies, rent control, risk free rate, risk tolerance, road to serfdom, Robert Shiller, Ronald Reagan, Schrödinger's Cat, seminal paper, shareholder value, Silicon Valley, Simon Kuznets, South Sea Bubble, sovereign wealth fund, Spread Networks laid a new fibre optics cable between New York and Chicago, Steve Jobs, Steve Wozniak, The Great Moderation, The Market for Lemons, the market place, The Myth of the Rational Market, the payments system, The Wealth of Nations by Adam Smith, The Wisdom of Crowds, Tobin tax, too big to fail, transaction costs, tulip mania, Upton Sinclair, Vanguard fund, vertical integration, Washington Consensus, We are the 99%, Yom Kippur War

John Ruskin, Unto this Last, 1860 The key insight of Adam Smith’s Wealth of Nations is misleadingly simple: if an exchange between two parties is voluntary, it will not take place unless both believe they will benefit from it. Milton Friedman, Free to Choose, 1980 In 2005 the Federal Reserve Bank of Kansas City held a symposium at the agreeable Wyoming resort of Jackson Hole. The purpose was to honour Alan Greenspan, who would soon retire from his position as chairman of the Federal Reserve Board. Raghuram Rajan, then chief economist at the IMF, queried the value of recent innovation in financial markets and warned of troubles ahead.1 Rajan’s paper was not well received. The principal discussant was the vice-chairman of the Federal Reserve Board, Don Kohn.

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When the economy is booming, house prices are rising and credit is easy, then mortgage defaults are rare. The usual cause of arrears is some catastrophic event, such as severe illness or family break-up. As Tolstoy famously observed, all unhappy families are different, and these events will be independent of each other. Alan Greenspan explained in his 2008 congressional testimony how the data the rating agencies used to assess mortgage-backed securities were drawn from this benign overall economic environment. But when house prices stalled and credit tightened, these factors affected the ability of all home-buyers to meet their mortgage obligation.

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Counsel’s opinion does not have the legal status of a court ruling, but neither regulatory nor fiscal authorities sought to challenge Mr Potts’s view. Most CDS contracts were subsequently made under English law, providing a profitable activity for London lawyers. Some doubt remained as to the legality of such transactions by US residents, but this was settled by the Commodity Futures Modernization Act of 2000, promoted by Fed chairman Alan Greenspan and by (now Treasury secretary) Larry Summers.11 Mr Potts’s benign opinion, and the enthusiasm of US policy-makers, set the scene for the explosive growth of the markets in credit securities – credit default swaps and collateralised debt obligations – which were at the centre of the financial crisis.

Being Wrong: Adventures in the Margin of Error by Kathryn Schulz

affirmative action, Alan Greenspan, anti-communist, banking crisis, Bear Stearns, behavioural economics, Bernie Madoff, Boeing 747, car-free, Cass Sunstein, cognitive dissonance, colonial rule, conceptual framework, cosmological constant, cuban missile crisis, Daniel Kahneman / Amos Tversky, dark matter, David Sedaris, desegregation, Johann Wolfgang von Goethe, lake wobegon effect, longitudinal study, mandatory minimum, mirror neurons, Pierre-Simon Laplace, Ronald Reagan, six sigma, stem cell, Steven Pinker, subprime mortgage crisis, Tenerife airport disaster, the scientific method, The Wisdom of Crowds, theory of mind, Thomas Kuhn: the structure of scientific revolutions, trade route

—ALEXANDER POPE, “AN ESSAY ON CRITICISM” On October 23, 2008, Alan Greenspan, the former chair of the Federal Reserve, appeared before a committee of the U.S. House of Representatives to testify about the financial crisis that had lately engulfed more or less the entire planet. Not surprisingly, the atmosphere was somber, and Henry Waxman, the California Democrat who chaired the committee, was not in the mood to pull his punches. “The Federal Reserve had the authority to stop the irresponsible lending practices” that had fueled the crisis, Waxman reminded those in attendance. But, he continued, “its long-time chairman, Alan Greenspan, rejected pleas that he intervene.”

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These stories involve, among other things, illusions, magicians, comedians, drug trips, love affairs, misadventures on the high seas, bizarre neurological phenomena, medical catastrophes, legal fiascos, some possible consequences of marrying a prostitute, the lamentable failure of the world to end, and Alan Greenspan. But before we can plunge into the experience of being wrong, we must pause to make an important if somewhat perverse point: there is no experience of being wrong. There is an experience of realizing that we are wrong, of course. In fact, there is a stunning diversity of such experiences. As we’ll see in the pages to come, recognizing our mistakes can be shocking, confusing, funny, embarrassing, traumatic, pleasurable, illuminating, and life-altering, sometimes for ill and sometimes for good.

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When we talk about beliefs in casual conversation, we usually mean our overt convictions about important matters: about religion or morality or propriety, politics or economics, ourselves or other people. These beliefs are explicit, in the sense that we are aware of having them, and can articulate and defend them if called upon to do so. Put differently, there is an experience associated with holding them. It felt like something for Alan Greenspan to believe in market self-regulation, just as it feels like something for you to believe in God, or in universal healthcare, or that your father-in-law dislikes you. By contrast, when philosophers talk about belief (which they do often; it is an occupational hazard), they mean something markedly different.

The Rise and Fall of the Neoliberal Order: America and the World in the Free Market Era by Gary Gerstle

2021 United States Capitol attack, A Declaration of the Independence of Cyberspace, affirmative action, Affordable Care Act / Obamacare, air traffic controllers' union, Airbnb, Alan Greenspan, Alvin Toffler, anti-communist, AOL-Time Warner, Bear Stearns, behavioural economics, Bernie Sanders, Big Tech, Black Lives Matter, blue-collar work, borderless world, Boris Johnson, Brexit referendum, British Empire, Broken windows theory, business cycle, Capital in the Twenty-First Century by Thomas Piketty, Cass Sunstein, collective bargaining, Cornelius Vanderbilt, coronavirus, COVID-19, creative destruction, crony capitalism, cuban missile crisis, David Brooks, David Graeber, death from overwork, defund the police, deindustrialization, democratizing finance, Deng Xiaoping, desegregation, Dissolution of the Soviet Union, Donald Trump, Electric Kool-Aid Acid Test, European colonialism, Ferguson, Missouri, financial deregulation, financial engineering, Francis Fukuyama: the end of history, Frederick Winslow Taylor, full employment, future of work, Future Shock, George Floyd, George Gilder, gig economy, Glass-Steagall Act, global supply chain, green new deal, Greenspan put, guns versus butter model, Haight Ashbury, Henry Ford's grandson gave labor union leader Walter Reuther a tour of the company’s new, automated factory…, Ida Tarbell, immigration reform, informal economy, invention of the printing press, invisible hand, It's morning again in America, Jeff Bezos, John Perry Barlow, Kevin Kelly, Kitchen Debate, low interest rates, Lyft, manufacturing employment, market fundamentalism, Martin Wolf, mass incarceration, Menlo Park, microaggression, Mikhail Gorbachev, military-industrial complex, millennium bug, Modern Monetary Theory, money market fund, Mont Pelerin Society, mortgage debt, mutually assured destruction, Naomi Klein, neoliberal agenda, new economy, New Journalism, Northern Rock, obamacare, Occupy movement, oil shock, open borders, Peter Thiel, Philip Mirowski, Powell Memorandum, precariat, price stability, public intellectual, Ralph Nader, Robert Bork, Ronald Reagan, scientific management, Seymour Hersh, sharing economy, Silicon Valley, Silicon Valley ideology, Silicon Valley startup, social distancing, Steve Bannon, Steve Jobs, Stewart Brand, Strategic Defense Initiative, super pumped, technoutopianism, Telecommunications Act of 1996, The Bell Curve by Richard Herrnstein and Charles Murray, The Chicago School, The Rise and Fall of American Growth, The Wealth of Nations by Adam Smith, Thomas L Friedman, too big to fail, Uber and Lyft, uber lyft, union organizing, urban decay, urban renewal, War on Poverty, Washington Consensus, We are all Keynesians now, We are the 99%, white flight, Whole Earth Catalog, WikiLeaks, women in the workforce, Works Progress Administration, Y2K, Yom Kippur War

For insight into Greenspan, see Binyamin Appelbaum, The Economists’ Hour: How the False Prophets of Free Markets Fractured Our Society (New York: Little, Brown, 2019), 298–308. 59.American homeowners, Adam Tooze has noted, “were the greatest source of demand for the world economy.” Tooze, Crashed, 43. 60.Sebastian Mallaby, The Man Who Knew: The Life and Times of Alan Greenspan (New York: Penguin Press, 2016); Robert D. Auerbach, Deception and Abuse at the Fed: Henry B. Gonzalez Battles Alan Greenspan’s Bank (Austin: University of Texas Press, 2008). 61.Gerstle, “Minorities, Multiculturalism, and the Presidency of George W. Bush”; Weisberg, The Bush Tragedy; Draper, Dead Certain; Ron Suskind, The Price of Loyalty: George W. Bush, the White House, and the Education of Paul O’Neil (New York: Simon and Schuster, 2004). 62.Jo Becker, Sheryl Gay Stolberg, and Stephen Labaton, “Bush Drive for Home Ownership Fueled Housing Bubble,” New York Times, December 21, 2008, https://www.nytimes.com/2008/12/21/business/worldbusiness/21iht-admin.4.18853088.htm, accessed September 2, 2021. 63.Kevin M.

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If elected, he boasted, he would reduce the number of federal agencies from 1,900 to 200.38 A shrinkage on that scale was fantastical. Nevertheless, the steps Carter took to “deregulate” the economy may have been the most significant domestic accomplishment of his presidency. Unlike Reagan, Carter had not spent his spare time reading Friedrich Hayek. Unlike economist Alan Greenspan, who began a long public career as chairman of the Council of Economic Advisers under Gerald Ford, he did not grow up entranced by the novels of Ayn Rand. But Carter did have a muse of his own who filled his ears with thoughts about the need to rethink the relationship between government and the economy.

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Only after such exposure and reform would “the people” be restored to their sovereign perch. Consumers were at the center of Nader’s vision of popular democracy; they, not workers, were the ones whom he wanted to empower. Neither Nader nor Carter worshipped the private sector in the manner of neoliberals such as Milton Friedman or Alan Greenspan. However, their determination to strengthen consumers meant that they, too, began to give priority to improving markets. This meant attacking corporate oligopoly, on the one hand, and excessive and counterproductive government regulation, on the other. Their shared goal was to make consumers sovereign in the marketplace.

The Devil's Derivatives: The Untold Story of the Slick Traders and Hapless Regulators Who Almost Blew Up Wall Street . . . And Are Ready to Do It Again by Nicholas Dunbar

Alan Greenspan, asset-backed security, bank run, banking crisis, Basel III, Bear Stearns, behavioural economics, Black Swan, Black-Scholes formula, bonus culture, book value, break the buck, buy and hold, capital asset pricing model, Carmen Reinhart, Cass Sunstein, collateralized debt obligation, commoditize, Credit Default Swap, credit default swaps / collateralized debt obligations, currency risk, delayed gratification, diversification, Edmond Halley, facts on the ground, fear index, financial innovation, fixed income, George Akerlof, Glass-Steagall Act, Greenspan put, implied volatility, index fund, interest rate derivative, interest rate swap, Isaac Newton, John Meriwether, junk bonds, Kenneth Rogoff, Kickstarter, Long Term Capital Management, margin call, market bubble, money market fund, Myron Scholes, Nick Leeson, Northern Rock, offshore financial centre, Paul Samuelson, price mechanism, proprietary trading, regulatory arbitrage, rent-seeking, Richard Thaler, risk free rate, risk tolerance, risk/return, Ronald Reagan, Salesforce, Savings and loan crisis, seminal paper, shareholder value, short selling, statistical model, subprime mortgage crisis, The Chicago School, Thomas Bayes, time value of money, too big to fail, transaction costs, value at risk, Vanguard fund, yield curve, zero-sum game