Nathan Bransford, Author


Monday, November 15, 2010

Alan Greenspan and the Greatness of Admitting You're Wrong

Note: And now for something a little different!

My wife left town a few weeks ago for a work trip, and like any thirty-year-old man away from the watchful eye of his spouse, I cued up PBS' Frontline documentary about unregulated derivatives and the early warning signs of the financial crisis.

You know women, always keeping a man from his current events documentaries. Am I right, fellas??

The documentary mainly centered on a battle of minds between Alan Greenspan, ardent de-regulator and chairman of the Federal Reserve, and Brooksley Born, who wanted to regulate financial derivatives. (Bear with me, this post will get interesting. I think.)

Backstory on Greenspan. He believed in the purity and rationality of financial markets, and thought that any attempt by the government to meddle with the markets was doomed to fail. And he believed this with an almost religious zeal. Greenspan was heavily influenced by the libertarian philosophy of Ayn Rand, and was a member of Rand's inner circle, to the extent that she stood beside him when he was sworn in as Chair of the Council of Economic Advisors.

Well, we all know what happened. While serving as Chairman of the Federal Reserve for nearly twenty years during a period of nearly unprecedented prosperity, Greenspan succeeded in his efforts to persuade the country that a largely unregulated financial market was the way to go.

Then we experienced the greatest financial meltdown since the Great Depression, and guess what, financial derivatives and deregulation played a big role in that crisis.

Now. You're Alan Greenspan. One of the biggest calamities in financial history just occurred. You have just spent your entire working life trying to achieve a goal, you did it with incredible zeal, and you were so talented you succeeded at obtaining it. But just as you're walking out the door having completed your life's work, something goes very very wrong that strikes at the heart of everything you worked for.

What do you do?

I would wager that at least 95% of the human population would blame external factors. They'd say, "Oh, well, such and such couldn't have been anticipated!" Or they would point to the fact that not all of their suggestions were implemented, and say, "The problem is that people didn't listen to me enough."

Not Greenspan. In one of the most arresting moments in THE ENTIRE PBS SPECIAL ON FINANCIAL DERIVATIVES WHICH WAS BASICALLY THE CHUCK NORRIS ACTION MOVIE OF FINANCIAL DOCUMENTARIES, in October of 2008 Greenspan went before a Congressional Committee and said something pretty profound:

I was wrong.

And not a measly little, "I was a little bit wrong." Representative Henry Waxman asked Greenspan point blank if he was wrong about the events surrounding the crisis or whether his entire world view had been wrong:

Waxman: “In other words, you found that your view of the world, your ideology, was not right, it was not working."
Greenspan: “Absolutely, precisely. You know, that’s precisely the reason I was shocked, because I have been going for 40 years or more with very considerable evidence that it was working exceptionally well.”

!!!!

(In an action movie that's where a tanker truck would explode.)

We all know that it's not easy to admit when we're wrong. Heck, it's not even easy to always spot when we are wrong in the first place. The brain wants to think it's right.

And it's another thing entirely to admit that we've been wrong about something on the order of an entire worldview. This was essentially Greenspan's religion, and at the end of his life he realized the foundation was shaky. That's a really big thing to admit to yourself, let alone to Congress. What is it like to look back on a life's worth of work and realize you went astray?

And sure, it's probably better to be, you know, correct in the first place than to have a deathbed conversion after things have already burned to the ground.

But I still think there's something great about Greenspan admitting he was wrong. We live in a world that is perpetually torn asunder by divisions and partisanship and circles where there's no such thing as being wrong as long as you're on the right team. Sometimes it feels like the truth is being splintered into a million pieces, and everyone gets their own little sliver to call their own, and the whole idea of truth is perpetually in the eye of the beholder.

But Greenspan looked at the facts, he looked as his track record and beliefs, and he couldn't square it. And there's something kind of amazing about someone standing up and saying, "You know what? I was wrong."






84 comments:

Daryl Sedore said...

He who blames others has a long way to go.
He who blames himself is halfway there.
He who blames no one has arrived.

"Freedom only happens when you stop thinking the outside world is the source of your pain."
~Anthony Robbins

Liz Fichera said...

Wow. You weren't kidding that was some kind of different post!

Krista V. said...

I majored in Economics in college ('02-'06), and Alan Greenspan was a rockstar. Now, I can't help but wonder if anyone really knows what the heck they're talking about. Mathematical models are only as good as the axioms underlying them, so if the axioms are false, well... (<--That ellipsis is the blog comment equivalent of a not-far-distant nuclear boom.)

DUO said...

Wow - you're posting very early these days, Nathan. Works great for those of us across the pond! :o)

Brad said...

Greenspan's mea culpa came when he was out of office, no? I could be wrong, but it smacks of public relations image repair. Too bad Ayn Rang isn't around to apologize for those awful books.

Iliadfan said...

There's a book called "Mistakes Were Made (But Not By Me)" that talks about why people justify things they do/believe that are so obviously wrong. It had a strong impact on me, and on the rare occasion when I hear someone unambiguously stating they were wrong, I wonder what makes them so different from just about everyone else, why they can self-critique in a way most people never manage.

As for mathematical models, I don't know if Greenspan was COMPLETELY wrong - like a lot of libertarians (myself included) I think he just forgot to factor the human elements (e.g. greed,or the tendency to overweigh short-terms gains) into his calculations.

Anita Saxena said...

I agree that it takes a lot to come out and say, "I'm wrong." But, part of me wonders if Greenspan may just be folding his cards a bit too early, a little self doubt. Perhaps, as he said, his model may have had flaws. But when it comes to the country's finances there are so many external and internal factors at play, it's hard for any one to accurately analyze any of it. Just my two cents.

Haste yee back ;-) said...

I urge EVERYONE who is even remotely interested in this "Financial Meltdown" to read Matt Taibbi's Rolling Stone article, THE GREAT AMERICAN BUBBLE MACHINE... and then go on to his book GRIFTOPIA.

And it'll happen again...

Total American Banker's executive bonus packages for 2009... $70
BILLION... (a record) - just about 10% of the $780 Billion stolen from American taxpayers for Banks and Wall Street's "Bailout!"

Goldman Sachs total fine for knowingly selling bogus paper... $580 Million - 14 days worth of their profit!

Financial reform... ain't gonna happen!

Haste yee back ;-)

M.A.Leslie said...

I can appreciate a person like Greenspan that so willingly admits when he is wrong. What heats me to an internal boiling point is the person who is so obviously wrong and just never apologizes. And then have the audacity to debate with others about the fact that they could have been miss quoted or misunderstood. If you’re wrong then say you’re wrong. It is really a simple concept that should be one of the life lessons we should all be learning in kindergarten or pre-k 2 nowadays.

Perri said...

Thanks, Nathan. This is really interesting. During the actual meltdown, I was so pissed at Greenspan et al, I didn't appreciate his honesty in owning up.

The older I get, the more I realize nobody knows anything. But I'm good with that....

Chris Phillips said...

This is the same guy who had a huge hand in the housing crisis by suggesting that people borrow against their homes like they were some bank people had just never though of tapping into. A lot of people lost their homes. He was wrong about more than derivatives.

Allison M. Dickson said...

Now if only he could have a sit-down with Ben Bernanke and tell him to stop with this Quantitative Easing nonsense that is going to further send our economy down the drain while further fattening the Goldman Sachs overlords.

Rick Daley said...

I'll second Haste Yee Back ;-)'s recommendation on the Taibbi article. It's long, but very compelling (and enraging, and frustrating, and...well, just read it).

WORD VERIFICATION: honiste. The phonetic truthiness Alan Greenspan is endowed with. (Or "with which Alan Greenspan is endowed" for the grammar police).

Julia Rachel Barrett said...

Brave. I think we must take responsibility for our actions. It's very easy to blame everything and everyone...but us. I've always like Alan Greenspan.

Istvan Szabo, Ifj. said...

Great post. Hearing the following words together "Sorry. I was wrong." is very rare these days, especially from the people in power. It's good to see there are rare exceptions.

simon said...

I used to think that it was a virtue to admit when you wrong, but it turns out I was mistaken. I will never concede that point, however.

Anonymous said...

Usually, I admire someone who can own up to his mistakes. Unless, of course, those mistakes are on an unfathomable level of stupid and have far-reaching, disastrous consequences.

Greensplan, a supposedly educated, professional, grown man believed in self-regulation? He believed that the greediest, most cutthroat people who ever lived would voluntarily show restraint and good judgment? That would be like a band of pirates deciding to only steal a certain amount from a ship.

And he didn't outgrow his Ayn Rand phase shortly after college???

Good post, but I am not impressed with the man. Not one little bit.

Bane of Anubis said...

Saying that you're wrong at this stage is kind of like an atheist finding religion on his deathbed.

Steppe said...

I think the economy gained the maximum it could from his side of the balance equation. I'm pretty sure he was a Friedman School of leave the markets alone. On the other hand he was always tweaking them with many forms psychologically. He was a good man I don't think he was completely wrong just to attached to ideology and unable to adapt quick enough when the elevator cable snapped and the emergency brakes came on.
Krugman of the NY Times is a good liberal historical source. Baron's is a good conservative source.
I memorized the conflict as a tool:


Fair Markets Vs. Free Markets
As
Limited Regular Intervention Vs. Zero Rules
As
Keynesian Followers Vs. Friedman Followers

Which translated into culture equals:

Some People are Nuts Vs All are Sane
AS
Freshwater Economists Vs. Saltwater Economists

Supposedly the total derivative debt of securities generated by car house and student loans is 205 trillion. A trillion hundred dollar bills equals a 68 mile stack into the sky. That's a stratospheric complexity level that we may not be able to unwind back into simple products with real bills of sales and titles of ownership certificates.
When I watch a documentary like that I feel like having a panic attack but just refuse to. The sun came up this morning that's all I know.

Deni Krueger said...

My hubby is deployed, and he would absolutely agree with you about catching up on the current events documentaries:)

Taking responsibility for your actions is a huge problem with kids in every school I've worked with over the last 8 years. Sometimes it seems the mantra has become, "Well he/she made me..."

Mira said...
This comment has been removed by the author.
Anne R. Allen said...

When you announced you were leaving agenting, one of my blog commenters said it was like hearing the Pope had made a career change. A little hyperbole there, but it's certainly true of Greenspan renouncing Ayn Rand and all her works.

Yes, he was brave (I think you're brave, too--and I love this post.)

But why didn't anybody listen??! This recent "landslide" of free-market Rand-ites (One of them named for her) is planning to further enable the financial robber barons to destroy the American middle class--and everybody's cheering. Love the recession? Wait till you see the total financial collapse we've got planned for you in 2013--yay!

lotusgirl said...

I appreciate when people take responsibility for themselves. I wouldn't say he was completely wrong though.

Haste yee back ;-) said...

Thanks, Rick Daley... glad you read it. Here's another, not from Taibbi. It's comming out soon.

IT TAKES A PILLAGE by Nomi Prins

The financial community is selling out America and will continue as long as they own ALL the politicians who allow them to get away with this reasoning, "If your bets go bad, take as much as you want from the treasury" - and they do!

The average Goldman Sachs VP, of which there are many... (and I know one)... take home bonus was in excess of $500,000. (Goldman's not alone in this heist).

These people do not care about America as we knew her!

Haste yee back ;-)

Mira said...

To really truly face the consequences of one's action when they have been destructive or deeply hurtful- is one of the greatest challenges someone can face. To grieve and grapple with one's terrible mistakes and ultimately come to terms with one's humanity is heartbreakingly difficult, which requires true strength of heart. When we can do it, though, we can find a certain deep acceptance.

If you haven't seen Ron Howards film about Nixon, he deals with this same topic in a poignant way.

Great topic, Nathan and worth discussing. We all have to deal with regret.

Kaitlyne said...

Since your wife's out of town, can I marry you?

Seriously fantastic post.

Fawn Neun said...

As long as some people continue to value the dream of cash over the solidity of their own honor, deregulation will never work to the benefit of society in general.

Matthew Rush said...

I always knew you were a "Marketplace" kind of guy.

D.G. Hudson said...

Isn't it funny how we admire those who tell the truth (which should be the status quo) since we've been inundated with so many liars in highly responsible positions in the last few decades?

It takes guts (that gut instinct again)to admit you're wrong. Thank goodness everyone doesn't drink the 'it wasn't me that did it' koolaid.

Is there hope for the human race yet?

Interesting post, except for the women keeping men from their news comment. Hmmm.

jjdebenedictis said...

This is a great point to make to writers.

If you blame others (such as the publishing industry's "gatekeepers") for your failures, then you're placing yourself in the role of victim-without-hope.

If you own your mistakes--take responsibility for your failures--then you're seeing what you can do to improve and succeed next time. You're more likely to maintain hope and keep trying.

It's easier on your ego to blame others, but it's better for your career if you don't.

Kristin Laughtin said...

Only you could make a post about economics that entertaining to me.

That said, I think it shows a good deal of integrity that he was able to admit to himself, as well as the rest of the world, that the entire basis of his philosophy was just plain wrong. It's hard enough for most people to admit they're wrong about little things. Having to confront your deepest-held assumptions, especially if they were based on evidence, and realize you've still drawn the wrong conclusions, can be devastating. I imagine most people would keep that private, try to defend their choices, and blame others when confronted, especially given the number of people who are angry with him because they lost their homes...

Josin L. McQuein said...

When I was in high school, we had to "analyze" political cartoons as part of our government class. One of the very few I can remember was an unemployment line where the different people were telling why they'd ended up jobless.

"They closed our plant last month," said a guy in jeans and flannel.

"It's a tough market," said the recent graduate in his college sweatshirt.

"Greenspan sneezed," said the high powered businessman in an expensive suit.

It stuck with me because of how well it illustrated how so much was placed on the opinion and recommendation of one man.

People try and over-simply things. They say there's a global economy where everyone is interdependent on everyone else, yet when things go toes up, there's no shortage of blame for specific people. Even if it's self-applied

Anonymous said...

I think it's important to note that people who blame Greenspan for losing their homes are doing the exact opposite of what he did. People lost their homes because they took out loans they couldn't possibly afford and decided to think about the consequences at some later date. I have yet to see one former homeowner come forward and say, "I was wrong to take out that massive mortgage."

Don't get me wrong, I really feel for those people. It's wrong that so many people lost their homes. However, if I decide to drive 80 mph down a windy, narrow road and crash, do I blame the police for not spotting me and pulling me over before I crashed?

Just a thought.

Other Lisa said...

Hey, I watch current affairs documentaries!

I hope Greenspan will continue to speak up about what went wrong. It astounds me that in spite of all evidence to the contrary that Randians and Free Marketeers still hold considerable sway over the macro-economic policies of the US...and that, yeah, the banksters will continue to get away with their greed and outright criminal behavior.

Ulysses said...

Ladies and gentlemen, there are some advantages to being Canadian. We don't have it as bad as you do, at this point. However, we still suffer from the same greed.

The CEO of Nortel, which imploded over the last decade and has been sold for organs since, has lodged a claim with Nortel's other creditors for multi-millions in compensation denied him under the terms of bankruptcy protection. A bankruptcy which occurred on his watch.

It's difficult to hear this man claim he was wronged while watching friends and ex-colleagues who were denied severance and pension scramble to find new jobs that might fund their retirement.

Thinking about it makes me physically ill, but then we've got socialized medicine so... you know, I've got that going for me.

Dea said...

I respect people who can admit that they're wrong. Good for Greenspan!

BUT – he needs to get back to work! Him and Rand have produced a million little followers who STILL believe in the free market system. He needs to convince all of them that it was wrong too!

As others have said – this economic collapse will not turn until the corporations get out of government.

M.A.Leslie said...

It is nice to know that even though I have crossed the threshold into the world of my thirties, I am not alone in finding a new found enjoyment with documentaries and the History channel.

Sarah said...

Wow. Politics aside, I'm impressed by someone who will admit, without qualification or excuse, that he was wrong.

wry wryter said...

Okay, I admit, I was wrong, dead wrong, as wrong as wrong can be...46 years ago I should have slept with Russel T.

So Mr G admitted he was wrong. He manned up, so what, that doesn't pay the bills, save the house, or the financial pile of s---.

Nathan, I loved this post, you were meant for PBS or NPR or CNN or whatever.

How long is it going to take for you to admit, you were wrong by leaving agenting?
I miss you.

Cara said...

Amen, Allison! Ben Bernanke's Quantitative Easing is the answer? Ugh. Highly suspicious. The bigger the government, the bigger the fraud.

Jeff S Fischer said...

Thank You. That was interesting. I have always thought Ayn Rand was a great writer, but I thought her philosophy was a little too close to inspired fiction for the real world. I had no idea about the Greenspan connection. I saw a documentary on Steven Hawking the other night, I don't know how old it is, and he admitted after 30 or 40 years that his ideas about black holes were wrong. Maybe this truth telling will become a popular mode of expression. We can only hope.

abc said...

When I go out of town my husband watching five hour Taiwanese films.

Nathan, this post is so awesome I don't think there is a way for me to describe its total awesomeness. Or something to that effect (that makes more sense).

AWESOME! (is there a German word for Awesome? perhaps that would be better)

Economics is one of the many things I don't understand and don't claim to, but I have to feel some joy at someone big and important saying he was wrong. Humility is a very fine thing. And not something many Americans are comfortable with. (Dick Cheney).

Anonymous said...

So only guys watch financial documentaries? Women are too silly for that? Not sure about your point there.

Anonymous said...

Alan Greenspan has also said that the financial crisis was not his fault, and he's blamed the financial collapse on many sources, including the Chinese and even the fall of the Berlin Wall: Alan Greenspan: The Financial Crisis Was Not My Fault. Also, this year Alan Greenspan began blaming low-income housing and NOT the investment community for the financial collapse ... and he's taken a job as "consultant at Pacific Investment Management Co., the $1 trillion asset management fund led by William H. Gross whose bond fund made $1.7 billion when he correctly bet that the federal government would not let Fannie and Freddie fail."

Nathan Bransford said...

anon@2:32-

Just a joke about my debaucherous current event watching when my wife is away.

Haste yee back ;-) said...

Want more? (I know I'm harping, but these people are really taking the Middle Glass and our Treasury to the woodshed!)

Available on Kindle... IT TAKES A PILLAGE by Nomi Prins.

Review of book at this link...

http://philip.greenspun.com/book-reviews/it-takes-a-pillage

Haste yee back ;-)

Bryan D said...

Great post, but Ayn Rand is rolling over in her grave for having been called a libertarian! (see her thoughts on libertarianism here: http://www.aynrand.org/site/PageServer?pagename=education_campus_libertarians)

Anonymous said...

Alan Greenspan did not exactly say he was sorry. He said that he might have been wrong in his exact model of how the world works. He now has his own consulting company, Greenspan Associates. He spends a great deal of his time studying data in order to tweak his model of how the world works. One of his theories is that the investment community might not have been selfish enough (selfish in the way Ayn Rand defines it) because they missed how detrimental their behavior was to themselves. He doesn’t seem to worry too much about people who were hurt in the financial crisis. His consulting clients now include Pimco, Deutsche Bank, and Paulson & Co., the hedge fund that made billions betting on the housing bust!

Anonymous said...

Another interesting article suggesting that Alan Greenspan hasn't completely changed his worldview:

Alan Greenspan Fights Back

M Clement Hall said...

But that doesn't stop him from enjoying the pension he gets, nor cause him to hurt for all those who have lost theirs.
Easy to say, "Sorry about that. I blew it" when it costs you nothing.
No, "Lo siento" there, he doesn't feel any pain, and as Eisenhower said, there's no more useless human sentiment than remorse.

Lillian Grant said...

You and my husband should get together. He loves those documentaries. I work in the finance game so I am not so excited to watch it at home. Fortunately we are more regulated than most and the financial crisis was just a hiccup on the way.

You have to admire a man who can admit his mistakes even if it was after the entire US economy got flushed down the pan.

I thank God Australia believes in a less capitalist regime.

J. T. Shea said...

You DO realize Mrs. Nathan can read probably read this blog post, however far afield she's tripping? She'll know the extent of the horrors that unfold in her absence, the depths of depravity you sink into! PBS documentaries!? Have you no shame? What next? Reading economics text books on your I-Pad?

BTW, I disagree with some of your analysis, and partly with Alan Greenspan. About being wrong. I think he was more right than he now thinks. US financial markets have always been highly regulated, and Greenspan moved a long way from Ayn Rand's philosophy a long time ago. But he did make the common error of assuming people generally behave consistently and logically. And that he and others could predict that behavior, i. e. guess what a person is going to do BEFORE that person has even decided what he or she is going to do. A delusion not limited to libertarians, unfortunately.

And may I gently remind everybody the the 'P' in PBS stands for PUBLIC, as in owned by the Government? I could also suggest that the financial problems of the USA owe more to profligate public spending by the likes of Henry Waxman than the past policies of Alan Greenspan, a view endorsed by a majority of US voters a couple of weeks ago, but that would be naughty. And, yes, derivatives are the work of the Devil.

But I could be wrong...

PJ Lincoln said...

Nathan,

It's nice to see you expand your blogging horizons. Keep it up ... you're a good writer and I think now that you are away from the publishing industry, you shouldn't limit yourself to talking just about books.

As far as Greenspan, sure it reflects well on him that he said he was wrong ... but was he being genuine, or doing spin control?


The problem with people like Greenspan, with political theorists like Rand and Karl Marx, for that matter, is that their ideas run counter to human nature. Both extreme individualism or communisim might do well in a perfect world where people didn't have to work together to get things done or actually have wants and desires of their own.

Our economic system is the way it is now for very good and pragmatic reasons. It's the model most countries end up with - local at China for gosh sakes!

As for Greenspan, I don't have much sympathy for him. His one-man crusade helped create an environment that very nearly put us in a second great despression.

Anonymous said...

I never knew Alan Greenspan was a fan of Ayn Rand, and I certainly didn't know her philosophy influenced his professional judgement. I love The Fountainhead, but it's an extreme perspective to espouse in real life.

wry wryter said...

Just reading all these posts makes me feel so smart.

It's Coming said...

"You say you want a revolution
Well, you know..."

Thaddeus Glapp said...

The fact that saying "I was wrong" is even remarkable is a sad commentary on our society. Even sadder is that someone would be surprised by it.

Anonymous said...

Nathan, one of your best posts ever IMHO. I've been taken aback by Greenspan's change of philosophy lately. Another interesting note about Greenspan is that while he was supporting all of this 'deregulation' he was at the same time manipulating the market through his control of interest rates in such a way that he -in my opinion- largely engineered the recession/housing bubble. I don't think anyone had ever gone to such lengths to manipulate the market in that fashion before.

On his way out, he was also fully supportive of the 'spend your way out of a depression' philosophy, encouraging the bailouts and the purchasing of bonds through the fed. Now that all of these efforts have proven to be haphazard at best, he's taking exception to the protege who is merely following in his footsteps.

Still, your point is taken. I'm sorry, and I take full responsibility for this post.

sex scenes at starbucks, said...

My kid, the many gods bless his soul, is an Arguer. He either has a career in prison or The Law, and we can only hope he uses his considerable genius for arguing his way out of doing nearly everything he doesn't want to do for good, not evil.

The only way to stop him in his tracks is to look him in the eye and say, "Yup. You're right. I'm wrong. The sky is a nice shade of puce today."

Tricia said...

And here all along I thought you were leading up to admitting you made a mistake by leaving agenting. I was ready to welcome you back with open arms.

My arms are dangling dejectedly. (I can use an adverb now and you can't reject me. hahahaha)

treeoflife said...

I believe that over time history will prove Greenspan wasn't wrong about as many things as it seems now...

He's a convenient scape goat, but as important as it is to admit one is wrong, it's equally important for people to take responsibility for their own actions. Hopefully people don't forget that when this crisis is over.

But who am I kidding? Of course they'll forget. It's an endless cycle of fear and greed. Greenspan can't be blamed for that. Like Warren Buffett said, "The only thing we can learn from history is that we don't learn from history."

Kristi Helvig said...

"the Chuck Norris action movie of financial documentaries" might be my new favorite line of yours. I try to always point out to my kids when I'm wrong--even though it's not about things as vital as the national economy, I think it's important to model flexible thinking.

Also, I hope your wife comes home soon. Does she have any idea how wild and crazy you are in her absence? :)

Anonymous said...

Alan Greenspan is still offering strong advice that rattles investors, recently in regard to global finances. In a guest column for the Financial Times prior to the G-20 Summit, Greenspan accused the U.S. of purposefully weakening the value of the dollar and the Chinese of holding down the value of the renminbi, and he advocated abandoning protectionism in order to allow global markets to flourish more naturally. He also said that China has become a "major global economic force" and should now take on the responsibility inherent in that position. Is he right? Who knows, but his remarks prior to the G-20 Summit sparked quite a bit of anger and nervousness. One of many articles about this: Greenspan warns over weaker dollar.

Mike Carpenter said...

Lee Iacocca said, "Lead, follow, or get out of the way." Greenspan needs to do the later and in a hurry. He should not hold the financial sway that he does with him being the driving force behind millions losing jobs in this economic downturn. It was more than derivitives. It was ultra low rates that were held there for too long, advocating for ARM mortgages, and asleep at the wheel regulation that, literally, almost made the global economy come to a stand still. Sorry does not cut it.

T. Anne said...

The post was great, and some of these comments were outstanding as well. I say what the heck, download the economics books to your ipad. ;)

Anonymous said...

I think it goes to show Alan Greenspan is a scientific man. In the context that he promoted his earlier economic beliefs, he was right to an extent. American miracle is a result of "market economy"; but for the US, the world would have gone astray in socialism. But present dynamics do also show that unregulated markets bring doom as well and based on fresh evidence he is willing to revise his long held opinions. Kudos. That is Scientific thinking - as new evidence emerges, you recallibrate your old theories. I think that is amazing of him. I would trust his further analysis even more because he has an open scientific mind.

(Similar scientific thinking is missing in politics although - we continue propagating passionately held theories without corroboration through reality. We need some Alan Greenspans in politics also.)

February Grace said...

I second that Chuck Norris line being perhaps one of the funniest things I've ever read here. Loved the tanker blowing up reference too- priceless.

I have to wonder if Greenspan ever wondered along his journey if he was wrong at the time he was still taking it. I think it's a lot better to realize you're wrong and admit/correct when you can still do something about the damage you're causing. Afterward, to those who've been irreparably damaged by your actions or "worldview" it's little consolation to hear someone say, "Yeah, I was wrong."

I also think admitting you were wrong is a lot harder to get out of when the entire world already knows it- though granted there are still people who would stubbornly say "No I meant to do that, you'll all see someday that I was right all along!"

This post proves to me that you could write about the menu at McDonalds and make it absolutely fascinating (any thoughts on the 'no Happy Meal toys' thing?)

~bru

Other Lisa said...

J.T. Shea, no, not really. With a few notable exceptions, almost all of the Democrats who were defeated in the midterms were Blue Dog conservatives, not progressives or reformers like Henry Waxman. And seriously, a guy like Waxman has spent the majority of his career going after business AND government malfeasance, waste and corruption.

Other Lisa said...

An interesting analysis of the midterm election.

Elie said...

@wry wryter - me too!

Recognising you are wrong and changing direction can be useful. But our culture loves to blame and scapegoat, which is why we don't often admit it.
I suspect in the case you refer to, that admitting to being wrong may be use of a technique called 'yielding' in martial arts (not an expert, folks, so correct if necessary!)which deflects an attack by giving way unexpectedly.

Claude Nougat said...

Excellent post! I remember watching Greenspan confessing he'd been wrong all his life and for the first time ever, he managed to impress me (before that I considered him a hopeless idiot who was always making all the wrong decisions, all the more an idiot for being an Ann Raynd fan!)
I agree with you: it takes courage to own up to one's mistakes, especially fundamental ones like in Greenspan's case.
Two things worry me: in view of the mid-term election results, how many Americans are willing to follow (or have followed) in Greenspan's footsteps?
The other is this: don't believe women aren't interested in this kind of subject: I am a woman and I am deeply interested (I've got an MA in Economics from Columbia, that might explain it...in part!) Check me out on my blog and you'll see: http://claudenougat.blogspot.com

John Arkwright said...

Greenspan was trying to plead guilty to a lesser charge than the one he is truly guilty of. For 2003-2006 he kept interest rates too low for too long, fueling the housing bubble. So now he says, "I was wrong--in that somebody else did it." He's the opposite of great.

chitrader said...

I respectfully beg to differ, Nathan. Greenspan didn't allow or encourage deregulation; he allowed and encouraged ignoring of the regulations we have in place. Anyone who wants to blame 'free markets' on our various financial messes of the past 30 years (going back to the Savings and Loan bailout of the mid-80s) doesn't understand our economy. We are the most regulated economy in the world. Just look at the Income tax code for starters. The failures of the economy were due to the failure of the regulatory agengcies to do their jobs.

Greenspan was a follower of AYn Rand back in the 60s, but soon did a one-eighty and became an ardent Keynesian, who sold out to the establishment in the hope of becoming the closest thing America has to being anointed king- becoming Chairman of the Federal Reserve.
His ex post facto apology was pure theatrics, designed to restore the luster to his image. In my and many other opinions, he'll go down in history as one of the worst Fed Chairmen ever, for what he wrought upon the American economy in the late 1990s and 2000s.
I'm glad he apologized, but he apologized for the wrong reasons and put the blame erroneously on 'free markets'. Truly free markets would never have precipitated any kind of financial crisis even one-tenth as bad as the mildest 'crisis' Greenspan submitted the US through during his tenure.

Respectfully,
ChiTrader

J. T. Shea said...

Interesting points, Other Lisa, but I didn't mention Democrats or Republicans. Most US politicians are profligate spenders of OPM (Other People's Money), many Republicans included, unfortunately. Voters have an innate sense of that fact, and try to use the rather simplistic two party system to express their concerns. With limited success.

We would probably differ as to who is or is not a 'Blue Dog conservative' or progressive or reformer, or even what these terms mean, but I do try to look beyond those ever-changing labels. I'm broadly Libertarian (another label, I know!) and favor individuality over organizations. I think most of us already belong to more than enough organizations at birth. Unlike many Libertarians, I do not excluded corporations from my critique of organizations. But the Government is the biggest and most intrusive organization.

Chitrader, I looked at the Income Tax Code once, and once was enough. Now I'm waiting for the movie version, which will be 1,000 hours long. Starring Chuck Norris.

Anonymous said...

Money, politics, religion, sex, and the weather are taboo discussion topics at our family's dinner table because they invariably cause arguments from passionate viewpoints.

Who and what caused the current financial crisis has many toxic inputs, so many that they "bio accumulated" as financial markets fed on toxic investment schemes. One or two toxic investmets spread across a few institutions wouldn't have caused a burp. But as the financial institutions laid off risks they were bought up and rose through the food chain and concentrated toxins. By the time they realized they'd been poisoned, there was no where else to lay them off.

Other Lisa said...

J.T. Shea, one point on which I agree with you: our political system is utterly dominated by big (primarily corporate) money. Until there's some kind of meaningful campaign finance reform, it will continue to be so. Where we seem to disagree is in what the midterm elections actually meant in terms of a "mandate." But let's leave it at that.

Other Lisa said...

As a p.s. I should say that I live in California, and I think the perspective might be a little different from here...

(word verification: "omens" -- really!)

J. T. Shea said...

Other Lisa, I don't make assumptions about your views based on geography. After all, Ronald Reagan lived in California too!

Corporate political donations can indeed over-influence politicians, though I believe the pursuit of pure power over others is more corrupting than the pursuit of mere money.

I don't see the mid-term elections as giving anyone an over-riding mandate, since the US electoral system is designed to avoid such single election mandates, and works well in that respect anyway. But the mid-terms do send a message (or messages). Mixed messages, admittedly, but messages nonetheless.

The irony is the same voters will probably make the same protests in two years' time by voting out the Republicans they just voted in!

Anonymous said...

I like Alan Greenspan, and agree with Iliadfan that his theories were right, with the exception that equations didn't take greed into account.

I LOVE how everyone likes to blame the large companies, yet time and time again, I saw people buy a house they couldn't afford, two SUVs they couldn't afford, and they cry like a baby when the thing folded and they had to foreclose. I don't feel sorry for any of them.

I think Alan expected people to have more common sense, but 80% of the population doesn't. Just look at the size of the houses that are foreclosing.

I myself never bought a house that I couldn't afford on one salary. Even if that means I lived in a smaller one.

Most people aren't like me. They're greedy, then blame the government/big banks for their woes.

Anonymous said...

Admit wrong, forgive ourselves, fix problem, leasson learned, move on and save 10 years of wasted stress from life!!! And that advice only takes 30 seconds to follow. Wow, who'd of thought maturity could really be so simple??? =]

J. T. Shea said...

Anonymous 6:13 am, you're right, unfortunately, and what is really frightening is that the current policy of both Democrats and Republicans seems to be to re-inflate the credit bubble in general, and the housing bubble in particular, as quickly as possible.

Carson Lee said...

"We live in a world that is perpetually torn asunder by divisions and partisanship and circles where there's no such thing as being wrong as long as you're on the right team. Sometimes it feels like the truth is being splintered into a million pieces, and everyone gets their own little sliver to call their own, and the whole idea of truth is perpetually in the eye of the beholder."
Ya said a mouthful there, Kid. Exactly what I've noticed and have been thinking, off & on, for a while. When I worked as a lobbyist at the state level, around 2000 - 2003, somewhere in there, a few lobbyists I worked with began using this expression: "Perception is reality." With a sort of urgency, even desperation: "Perception is reality!" "Perception is reality" ("The sky is falling!" Whatever.)
And I would think, "No. No it isn't." ---------- Example: One day in a parking lot I waved at this guy getting out of a red pickup because I thought it was Mr. K, from my hometown: turned out it was Mr. B from the bank. OK. I was wrong. My PERCEPTION: it was Mr. K. The REALITY: it was Mr. B. Perception -- Reality -- in that case, NOT the same thing.

But the philosophy was there, and seemed to be -- 'it's whatever you can get people to believe.' And it was new. When I had begun lobbying, the rule was, "Never lie, because then you would lose your credibility."
The advent of "Perception is reality" seemed to coincide with widespread use of the internet. Not to "BLAME" the internet, but it seems to be the way some people use it -- we were told this would be the "Information Age" -- sometimes it appears to be turning into the "Age of Disinformation."

Just found your blog. Like it. Will read daily. This post: edifying & excellent.

Amanda Sablan said...

Bit of a late response but whatever.

Yes, it's admirable that Greenspan admitted he was wrong, but... too much regulation would have put us in an even worse economic quagmire because the government is perpetually incompetent.

Anonymous said...

You mean his fascination with Rand was not a red flag? She is/was the Rush Limbah of the left.

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