Greenspan Concedes to `Flaw’ in His Laissez-faire Market Ideology

October 23, 2008 by · Leave a Comment
Filed under: Opinion 

Finally, why does it take 6 years for someone to admit an obvious mistake?  If you think leaving our benchmark interest rate at 1% for 41 months straight that causes the biggest asset bubble ever isn’t a mistake, than I don’t know what is.  And I would not call it a “flaw”, more like a BIG F^&^($ FLAW to start.

The writing is on the wall and at this point the best option is to let this problem explode and let companies fail, no matter how big so we can get rid of all this bad debt and then we can start with a fundamentally sound base and at that point we can address the problems that helped this disaster ie: reduction of the middle class, debt-based money and under-education of the lower and middle classes (and the upper as well). 

Bloomberg:

 Former Federal Reserve Chairman Alan Greenspan said a “once-in-a-century credit tsunami” has engulfed financial markets and conceded that his free-market ideology shunning regulation was flawed.

 
“Yes, I found a flaw,” Greenspan said in response to grilling from the House Committee on Oversight and Government Reform. “That is precisely the reason I was shocked because I’d been going for 40 years or more with very considerable evidence that it was working exceptionally well.”

Greenspan said he was “partially” wrong in opposing regulation of derivatives and acknowledged that financial institutions didn’t protect shareholders and investments as well as he expected.

“We cannot expect perfection in any area where forecasting is required,” he said. “We have to do our best but not expect infallibility or omniscience.”

Part of the problem was that the Fed’s ability to forecast the economy’s trajectory is an inexact science, he said.

“If we are right 60 percent of the time in forecasting, we are doing exceptionally well; that means we are wrong 40 percent of the time,” Greenspan said. “Forecasting never gets to the point where it is 100 percent accurate.”

Self-Policing

The admission that free markets have their faults was a shift for the former Fed chairman who declared in a May 2005 speech that “private regulation generally has proved far better at constraining excessive risk-taking than has government regulation.”
 

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