Someone at The Wall Street Journal got a jump on the competition when it found a copy of Alan Greenspan’s new book in a New York area bookstore. The newspaper was so delighted by its find that its article about the book, The Age of Turbulence: Adventures in a New Word, was the lead story in Saturday’s edition.
The self-described “lifelong libertarian Republican” defends his economic decisions that many economists say helped nurture the country’s housing bubble. In particular, they blame Greenspan, the former Federal Reserve chairman, of slashing short-term interest rates down to a measly 1% in 2003 and then keeping them there for a year.
The rock-bottom interest rates helped fuel the home buying stampede that led many less qualified Americans to borrow money through those now notorious subprime loans. As we know, the subprime market has imploded creating a great deal of hardship for many people with these mortgages. Of course, the victims also include the people who bought homes with inflated price tags only to see them deflate along with the bubble.
Curiously, Greenspan doesn’t accept blame for the policy decision in his book. “We wanted to shut down the possibility of corrosive deflation,” he wrote. “We were willing to chance that by cutting rates we might foster a bubble, an inflationary boom of some sort, which we would subsequently have to address…It was a decision done right.”
According to The Wall Street Journal, Greenspan attributed the housing boom to the fall of communism. With capitalism unleashed around the world, millions of more workers were available, which pushed down wages and prices and ultimately long-term interest rates.
Greenspan, who was paid more than $8 million for the book, makes political news by piling on with President George W. Bush’s many critics. He blamed Bush and the former Republican Congress for their parts in the federal spending orgy. He suggested that the Republicans deserved to lose the 2006 election because they “swapped principal for power.”
Greenspan also commented on the other five presidents that he served. He said Gerald Ford “was as close to normal as you get in a president.” He noted, however, that Ford wasn’t elected. He called Richard Nixon an “extremely smart man, who is sadly paranoid, misanthropic and cynical.” He called Ronald Reagan’s ability to use one-liners to support his policies “an odd form of intelligence.” He said Bill Clinton was the president with a “consistent, disciplined focus on long-term economic growth.”
If you want to learn more, you should be able to pick up a copy of the book at just about any book store on Monday.
In the meantime, please check out my latest column that you can find by clicking on the column link on the right hand side of the screen.