Alan Greenspan vs. Ben Bernanke: the follies of Fed chairmen
Poor ol鈥� Alan鈥�
We almost felt sorry for him鈥�
鈥淢aestro mauled鈥︹�� said the headline in The Financial Times. We wanted to maul him many times. But now that others were doing it鈥t made us feel sympathetic to the old scalawag.
Didn鈥檛 the Alan Greenspan Fed鈥檚 failure to curb subprime lending deserve to go into the 鈥榦ops鈥� category, demanded chief tormentor Phil Angelides.
Mr. Greenspan defended his legacy. He was right 70% of the time, he said. The other 30% of the time he was wrong.
Hey, that鈥檚 not bad. Pity it鈥檚 not true. Greenspan was wrong 90% of the time 鈥� at least.
He thought those fancy derivatives actually spread the risk of failure鈥nd made the system more stable.
He thought those subprime loans helped people of modest incomes realize the goal of home ownership.
He saw no risk in keeping the key rate at an 鈥榚mergency鈥� low level鈥ears after the emergency had passed.
But he hit one of those magic moments last week鈥hen he was finally right about something. He declared that the yield on the 10-year note was 鈥渢he canary in the coal mine.鈥� This week, the canary wobbled鈥ut stayed on his feet. He鈥檚 still standing鈥ut looking a little peaked.
While the former Fed chief was in the spotlight at The Financial Times yesterday, the present Fed chief was front-page news over at The Washington Post. Alan Greenspan is a scoundrel, no doubt about that. But he was, in some ways, a better Fed chief than Bernanke.
The trouble with Bernanke is that he doesn鈥檛 know his limitations. He actually believes the Fed can look at the possible outcomes going forward and improve them before they come out.
鈥�Fed chief sounds a deficit warning,鈥� is the headline. He said Americans faced a 鈥渄ifficult choice.鈥� It鈥檚 between higher taxes and fewer entitlement services, he said.
This doesn鈥檛 seem like a difficult choice to us. We鈥檇 gladly accept fewer 鈥渟ervices鈥� from the feds if they鈥檇 lay off on the taxes. But that鈥檚 because we鈥檙e in the half of the US households that actually pays taxes.
No kidding; the report was in yesterday鈥檚 news:
鈥淎lmost one half of US households pay no federal income tax.鈥�
So, welcome to the beginning of the end. If half the citizens get bread and circuses without paying for them, you can bet that the whole shebang is headed for destruction. The math doesn鈥檛 work. Half the people have no interest in curbing taxes or spending. Obviously, those people would prefer to raise taxes 鈥� on us 鈥� rather than give up their free pills and retirement benefits. Even among the half that does pay taxes, most pay very little 鈥� less than they get back in 鈥榮ervices.鈥�
Meanwhile, the 鈥榬ich鈥� get socked hard. According to the reports we鈥檙e seeing on scurrilous blogs and from our usually unreliable sources, the tax burden on the rich is set to rise over 60% of income 鈥� thanks to the health care charges they will have to bear.
By the way鈥he whole thing is a fraud. The services, that is鈥�
Here鈥檚 how it works. In 2007, the private sector finally blew itself up 鈥� thanks largely to all that debt offered by Wall Street and encouraged by the Alan Greenspan/Ben Bernanke Fed.
So then鈥n comes the Fed again鈥nd the US government鈥earing white hats and pretending to save the situation. How? By bringing more of the economy under their control!
As far as we can tell, the last successful government program was WWII. And that was only successful because the competitors鈥� programs were also run by government. But that doesn鈥檛 stop them鈥�
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