Losing Faith in Greenspan

Greenspan has lost my confidence. I used to have confidence in him. Today, he has supported and created economic conditions that considerably weaken our long term economic health.

In a Central Bank panel discussion to the International Monetary Conference, Beijing, People’s Republic of China (via satellite) on June 6, 2005 Greenspan says "The economic and financial world is changing in ways that we still do not fully comprehend. Policymakers accordingly cannot always count on an ability to anticipate potentially adverse developments sufficiently in advance to effectively address them. Thus our economies require, in my judgment, as high a degree of flexibility and resilience to unanticipated shocks as is feasible to achieve. Policymakers need to be able to rely more on the markets' self-adjusting process and less on officials' uncertain forecasting capabilities. "

So why did you lower interest rates ridiculously low rates and keep them there for such a long time? This was key in creating today's credit bubble that led to today's housing bubble. Why did you support a huge federal budget deficit (caused mainly by GOP tax cuts)?

Greenspan goes on to say "The U.S. economy's response to the terrorist attacks of September 11, 2001, is a case in point. That shock was absorbed by a recently enhanced, highly flexible set of institutions and markets without significantly disabling our economy overall. But that flexibility should not be taken for granted, and every effort should be made to preserve and extend it. "

Sure you have preserved the economy in the short run, but at what cost? Today's level of debt are simply unsustainable. The magnitude of the debt is truly staggering. Furthermore, most of the debt is not going into economic productive endeavors ( reasearch, factory building etc.) but instead buying stuff like plasma TVs, cars & SUVs, overpriced housing units. The sooner the housing bubble pops the sooner our economy can focus on productive economic development.