Tuesday, September 27, 2005

Greenspan: Don't blame Me

In Greenspan's speech today to the National Association for Business Economics Annual Meeting in Chicago he basically was covering his rear.

By the late 1990s, it appeared to us that very aggressive action would have been required to counteract the euphoria that developed in the wake of extraordinary gains in productivity growth spawned by technological change. In short, we would have needed to risk precipitating a significant recession, with unknown consequences. The alternative was to wait for the eventual exhaustion of the forces of boom. We concluded that the latter course was by far the safer. Whether that judgment continues to hold up through time has yet to be determined. .....

Relying on policymakers to perceive when speculative asset bubbles have developed and then to implement timely policies to address successfully these misalignments in asset prices is simply not realistic.

Perhaps. But much more importantly, your policy of lowering short term interest rates to such ridiculous low levels ( 1%), for such a long period of time, was a very significant factor in the 'speculative asset bubble' ( aka housing bubble) that we now face. Greenspan you are not off the hook.


  1. Sounds like he is acknowledging recognition of the bubble prior to having publically admitted to a bubble.

  2. The FED is basically saying that there is a bubble- but we should all relax- a decline in house values will not hurt the economy- wanna bet?

  3. And he used the word "bubble" in reference to the housing market. He's never done that before.

    Cole @ The Boy in the Big Housing Bubble

  4. astute comments marinite and skytrekker.

    Greenspan needs to be held accountable for his policies. He should not be allowed to get off the hook just because he knows 'Greenspeak'

  5. Cole,

    Yes he sort of did. He never used the term 'housing bubble.' Rather he used the term 'asset bubble'

  6. astute comments marinite and skytrekker

    For my part, no, just a reasonable memory of what people say.