The Bold and Daring Predictions of Alan Greenspan
My own suspicion is that we’re going to penetrate the 10 percent barrier and stay there for a while before we start down.
At some point we’re going to start to see an improvement in employment.
Click to enlarge.
We never did pay that man enough for what he's done to our economy.
See Also:
Sarcasm Disclaimer
Source Data:
St. Louis Fed: Precise Unemployment Rate (Custom Chart)
Greenspan didn't screw us over, we did that to ourselves.
ReplyDeleteHe certainly enabled our behavior, but he didn't sell us anything we didn't want to buy.
The true story of where we are now has to look back to the 1990s. Something happened in 1993-95 that changed things, temporarily boosting outlooks, but coming at a long-term cost that has yet to be paid.
I could throw in the obvious joke link referencing the accumulated trade deficit with China in the above paragraph, and that's part of it, but something else happened, too.
World wealth creation massively exploded 1995-2005 -- Apple has profited immensely from this, right from their first rather crappy iPod.
I actually was working for the mothership when it came out. Just a very small team of 20-30 people working in the same building created an enterprise worth billions -- thanks to China's productive capacity and cheap assembly labor that got the pricepoint under $300 for Apple.
Another thing that happened in the 1990s is that the baby boom transitioned from being up & coming young adults to old & declining old farts -- the median boomer of 1955 turned 40 in 1995.
I think this dynamic explains Japan's economic transition of 1990, too. Their baby boom was 5 years older than ours, and their economy hit the wall before ours too.
There is actually nothing fundamentally wrong with our economy. We can certainly create or trade for the wealth we need to feed, clothe, house, hospital, educate, and entertain ourselves.
The problem is one of ideologies and the colossal amounts of sheer BS that people believe to be true, to the extent people emerge from their know-nothing existences in the first place.
Jas was probably right, back in the day.
Troy,
ReplyDeleteHe certainly enabled our behavior, but he didn't sell us anything we didn't want to buy.
Absolutely. No disagreement there. We even paid him for the privilege.
The problem is one of ideologies and the colossal amounts of sheer BS that people believe to be true, to the extent people emerge from their know-nothing existences in the first place.
Indeed. The advancements in technology *should* make us prosperous beyond our wildest dreams. We're doing everything we can to see that the typical middle class American doesn't get much of the benefit though.
Doing the math on CBO's GDP projections out to 2050 earlier this week was highly educational for me. I'd heard and done some earlier spreadsheeting on their "long term" 2023 projection but hadn't looked at the actual numbers nor run them out to 2050.
ReplyDeleteHere CBO are extrapolating out to a future of real incomes of $140,000 per working age adult and Orszag and Diamond and other heavy opinion leaders are talking about how to divide that pie, how SSA might be only 6% of GDP but boy Medicare is going to kill us.
If a real GDP of $36T in 2050 -- $90,000 per man, woman, child -- is not the Jetsons future, I don't know what is.
I haven't bought anything other than haircuts, food & gas for 2 years now. I have checked out of the economy as much as possible and am in replacement mode. I could easily survive on $9,000 per year if our per-capita health care costs were $2500/yr like Japan's.
(I was supposed to express some general feeling of utter bewilderment at the end of that.)
ReplyDeleteHere CBO are extrapolating out to a future of real incomes of $140,000 per working...
ReplyDeleteI will feel mighty poor that day, because my future real income will be in serious decline by that point.
I haven't bought anything other than haircuts, food & gas for 2 years now. I have checked out of the economy as much as possible and am in replacement mode.
I'm somewhat similar. We better not share our frugality disease with others.
because my future real income will be in serious decline by that point.
ReplyDeleteyeah, and say goodbye to SSA COLAs if productivity increases 140% over the next 30+ years. We'll have such an oversupply of new stuff we'll all have to pay to get rid of it to make space for more new stuff.
I wonder how the future will in fact progress.
I can see 140% productivity gains in energy -- fusion or solar each has the potential to transform energy delivery like the jet turbine did for long distance travel.
Healthcare, same thing.
Food, sure, why not. Just take a $1 pill that feeds you for a week.
Entertainment . . . by then computers will be making everything themselves algorithmically no doubt.
Hmmm. 2050 is to 2012 as 2012 is to 1974.
Maybe we picked all the low-hanging fruit, 1974-2012, maybe not.
I expect to be around in 2050, but it's going to be ギリギリ as the Japanese say.
Been fun talking, sorry about the stream of consciousness, but I've got to get *something* done today . . .
Greenspan didn't screw us over, we did that to ourselves.
ReplyDeleteTroy,
I disagree. Greenspan did indeed screw us over.....in many ways! I'll give just a few examples (I could go on and on).
Greenspan was a driving force behind financial de-regulation (ending G/S, derivatives, CFMA, etc.). Beyond de-regulation, Greenspan wantonly ignored his duty to actually regulate and created an environment of "self regualtion" that was a sure fire recipe for financial fraud (heck, we had just witnessed the results of such stupidity in the S&L debacle).
The Fed had and has an affirmative duty to regulate the quality and quantity of credit. Greensham ignored credit growth above and beyond GDP growth - completely counter to the Fed's mandate. Also, under Greenspan, regulators that actually regululated were routinely over-ruled and/or forced out (Brooksley Borne).
There's no need to believe me. Seriously, look for yourself. Go ahead and read the Fed's actual mandate. You'll be one of the few that actually has!
Greenspan was a driving force behind financial de-regulation
ReplyDeletelike I said, he wasn't selling anything we didn't want to buy . . . is our system that fragile that we have a single point of failure?
I agree that the Fed had a policing mandate. But the Fed is a creature of Congress and if the Fed isn't doing its job it's Congress' job to step in and fix things.
The problem goes a lot further than Greenspan's particular active and passive malfeasance.
Perhaps going forward the Fed should be "seen and not heard".
The 1995-2005 period was just one big pump & dump really. I don't know if it was intentional or accidental and I don't know which alternative is worse.
People still haven't conceptualized what actually happened. http://delong.typepad.com/sdj/2012/03/the-balance-sheet-recession.html#comments is a regurgitation of my understanding wrt the previous decade.
I'm in the heterodox locus neighboring Keen, Hudson, and Stiglitz, so I say a pox on everyone's house.
Troy,
ReplyDeleteBeen fun talking, sorry about the stream of consciousness, but I've got to get *something* done today.
Illusion of Prosperity Blog = Productivity Killer
Hahaha! :)
mab (& Troy),
ReplyDeleteI'm right there between you and Troy.
I often joke that who else but Greenspan could write an "Age of Turbulence" book.
He should know! He helped get us here!
Troy,
ReplyDelete...is our system that fragile that we have a single point of failure?
Despair.com: Irresponsibility
Troy,
ReplyDelete. . is our system that fragile that we have a single point of failure?
Bad management and fraud at the top can easily ruin an entire organization. That's why the people in charge are held most accountable, or at least they used to be.
Up to this point, we haven't had one meaningful prosecution and we're not holding our breath for prosecutions either. The entire system is corrupt. Have you ever searched for common denominators between this crisis and similar events in history (in America and abroad)?
Imo, this epic fraud was willfully orchestrated. The bad management is no accident. Greenspan and his ilk were put in positions of responsibility for a reason - too allow a mass looting.
No one could have known? How could they not have known? The most basic principles of banking were violated to the tune of trillions. Bank fraud is nothing new, it's a centuries old problem.
Seriously, I'm supposed to believe that the lessons of the Great Depression were forgotten? I'm supposed to believe that the lesson the Fed learned from the S&L crisis was to further de-regulate? Bah, the Fed's take-away was to better cover up all the fraud! It just took a few more insiders at the top of the system.
As for "selling" us what we wanted, that's a superficial argument that can cavalierly be used to justify any immoral/illegal activity.
Troy,
ReplyDeleteThis might look like piling on, and I apologize for that.
like I said, he wasn't selling anything we didn't want to buy.
Again, I disagree. Did people really want to "buy" debt impoverishment?
People wanted to improve their lives and the lives of their families. People wanted to become wealthier. Isn't that the point of it all?
But that's not what Greenspan was "selling". Rather than a path to prosperity, Greensham was selling debt impoverishment. A sure-to-fail get "rich" quick debt ponzi scheme. How can CONsumption debt make people in aggregate wealthier?
Rationalizing away the fundamental truths is counter-productive. It prevents national understanding and increases the likelihood of future fraud and injustice.
As I see it, we have a management problem. People need to understand this.
Did people really want to "buy" debt impoverishment?
ReplyDeletehttp://research.stlouisfed.org/fred2/graph/?g=66A
speaks for itself I think.
That's what Greenspan was selling, and Americans signed on the dotted line.
I lean to towards the idea that the deregulators just believed their own BS, or were too far from the front-lines to understand the crimogenic situation developing in FIRE, 1995-2005.
And also that once they were on the tiger, the were too afraid to climb down.
People need to understand this.
Not one person in 100,000 has seen that CMDEBT chart. Only one in ten can probably understand it anyway.
Neoclassicals ignore it, neoliberals like Krugman reject it. Only Keen these days, along with a couple of other heterodox peeps like Hudson and Stiglitz, are carrying the flame.
mab,
ReplyDeleteDid people really want to "buy" debt impoverishment?
I say no.
That said, they wanted the free lunch that came with it (the ability to live in a house for free, even after debt payments, once it was resold to a greater fool in future years).
"May you find what you are looking for."
Perhaps that was Greenspan's quote, lol.
mab,
ReplyDeleteDid people really want to "buy" debt impoverishment?
I say no.
That said, they wanted the free lunch that came with it (the ability to live in a house for free, even after debt payments, once it was resold to a greater fool in future years).
"May you find what you are looking for."
Perhaps that was Greenspan's quote, lol.
Troy,
ReplyDeleteI believe that both Greenspan and Bernanke could read their own Flow of Funds accounts and think everything was just fine.
Some of us, on the other hand, realized that looking at "average" data can strip it of useful information.
Mark, Troy,
ReplyDeletePeople always want a free lunch, that's a given. The Fed's job isn't to CONvince people they can have a free lunch or to be a cheerleader for bubbles and financial fraud. The Fed's job is to ensure that banks issue legitimate/productive credit. And even if a particular Fed creates a looser regulatory environment that still doesn't change the basic duty of bankers vet loans.
I don't see how you can excuse the people at the top and blame the unsophisticated masses.
Here's the thing. We all seem to agree that the Greenspan Fed did not regulate the financial system in accordance with their mandate. We also all seem to agree that bankers willfully committed credit fraud on a massive scale.
We know that Greenspan was warned by Fed Gov. Gramlich and others of a housing bubble. We know the Fed and the banking community ignored FBI reports of epidemic mortgage fraud and actually accelerated the fraudulent mortgage lending after the FBI report. We know that the Fed and Treasury lied/misled CONgress and the American people regarding bank bailouts (AIG, FNM, FRE, etc.). We know the Fed violated it's charter during the AIG & Bear deals as well as with the trillions of mortgage purchases. We know that CONgress has been informed of numerous financial crimes.
We know that there are no meaningful investigations or prosecutons. We know that the S&L crisis, despite being vastly smaller, resulted in over 10,000 criminal referrals and 1000 high level cinvictions. We know the same (mis)-managers (Summers, Geithner, Bernanke, Blankfein, Dimon, etc.) are basically still in charge.
When do you stop seeing happenstance and start thinking that this was/is........something else?
The system is all effed up and there are no plans to fix it!
We're a plutocracy.
Not one person in 100,000 has seen that CMDEBT chart. Only one in ten can probably understand it anyway.
ReplyDeleteTroy,
If true, how can you excuse Greenspan and the other financial stewards and place the blame for the crisis on the unsophisticated masses?
mab,
ReplyDeleteI think we can safely assume that Greenspan was that one person in 100,000. We don't know if he was that one in ten though. Perhaps our eCONomy was a great mystery to him, lol. ;)
FWIW, I think that Greenspan simply had no conception that the system he had been running for 20 years would allow a part-time strawberry picker in Hollister to take out a $700,000 loan!
ReplyDeleteTBH, I don't even know if he understood how the 2001-2003 tax cuts and his post 9/11 rate drops would engender such a massive asset valuation rise in housing.
I certainly didn't see that coming at the time.
The positive-feedback nature of the phenomenon is something I'm trying hard to educate people on today.
Even today all over the web neoliberal economists are tossing off lines like "the balance sheet recession that started with the financial crisis of 2008".
http://delong.typepad.com/sdj/2012/03/the-balance-sheet-recession.html#comments
Krugman himself hasn't internalized that the $5T of new mortgage lending that went out 2002-2007 was a direct cash infusion to tens of millions of households.
I don't think Greenspan got it, either, how mortgage debt take-on was pulling the entire economy forward 2003-2006.
Debt is supposed to be something that comes out of incomes, not add to them.
One thing that also befuddled Greenspan was the loss of control of effective interest rates thanks to pay-option and teaser-rate lending. People were getting 0-3% rates until their loan reset/recast.
Who in the Fed even knew the difference between reset and recast?
I think they were overseeing machinery they did not understand and their free-market ideology allowed a lot of smart operators to game the absolute s### out of it through control fraud.
Hanlon's Razor applies.
FWIW, I think that Greenspan simply had no conception that the system he had been running for 20 years would allow a part-time strawberry picker in Hollister to take out a $700,000 loan!
ReplyDeleteThere's part of me that believes you are right.
The system is all effed up and there are no plans to fix it!
The other part of me believes mab is right.
So here I am right in the middle.
If I had to guess I'd say TPTB thought they had full knowledge of what was going on, reality said they didn't, so they panicked, and went into serious CYA mode to protect the plutocracy.