The Oracle Rewrites History

April 7, 2010 10:33 PM

Today, while testifying for only the second time on Capitol Hill since the financial crisis began, [former Fed chairman] Alan Greenspan said the Fed closely monitored the subprime market [...]"I was right 70% of the time, but I was wrong 30% of the time, and there were an awful lot of mistakes in 21 years...". But Greenspan's defense of his record today rang hollow to many seasoned observers, if not downright deceitful.
posted by HP LaserJet P10006 (44 comments total)

Nooooooooooooooottttttttttt Meeeeeeeeeeeeeeeeeee!
posted by edgeways at 10:35 PM on April 7, 2010 [1 favorite]

Under questioning from Bill Thomas, the vice chairman, Greenspan elaborated: "If we get it right 70 percent of the time, that is exceptionally good."

Good thing he's not a doctor.
posted by mek at 10:39 PM on April 7, 2010 [4 favorites]

"The Fed utterly failed to prevent the financial crisis," she said on Wednesday. "Failed to prevent the housing bubble, failed to prevent the predatory lending scandal."-Mother Jones link.

Yeah...that pretty much sums it up...but at least he was right about the petty cash in the office. I bet that factors into the 70% rating he gave himself.
posted by hal_c_on at 10:51 PM on April 7, 2010

Greenspan, the guy who worshipped at the feet of Ayn Rand, and never really broke free. With such an intellect, what could go wrong? Mix in a bit of right wing nuttery and a devotion to the idea that you've gotta starve the beast of government through tax cuts so that these would create massive budget shortfalls and plunge us into debt - big supporter of Shrub's tax cuts. Cause those surpluses under Clinton would drive us right into Communism. And loosen the regulations - such as there were - on those derivatives, hey, that's "creative" capitalism at work, and we don't want to cramp that style!

Fuck Greenspan. What a fraud.
posted by VikingSword at 10:52 PM on April 7, 2010 [17 favorites]

look deregulation got us into this mess and only deregulation can get us out
posted by hamida2242 at 10:59 PM on April 7, 2010

Yeah, Greenspan should have listened to smarter people.
posted by qvantamon at 11:03 PM on April 7, 2010

(quote for the tldr; crowd:

To fight this recession the Fed needs more than a snapback; it needs soaring household spending to offset moribund business investment. And to do that, as Paul McCulley of Pimco put it, Alan Greenspan needs to create a housing bubble to replace the Nasdaq bubble

posted by qvantamon at 11:05 PM on April 7, 2010 [2 favorites]

You know who else was right 70% of the time?
posted by Afroblanco at 11:08 PM on April 7, 2010 [3 favorites]

The Warning
posted by eddydamascene at 11:12 PM on April 7, 2010 [1 favorite]

You know who else was right 70% of the time?

Captain Smith!
posted by Brian B. at 11:27 PM on April 7, 2010 [2 favorites]

He was a saxaphone player who became an accountant. What more proof do you need that the Republican party is historically inept?
posted by parmanparman at 12:05 AM on April 8, 2010

He was a saxaphone player who became an accountant. What more proof do you need that the Republican party is historically inept?

Perhaps, but then again part of the problem is a certain saxophone-player-turned-governor-of-Arkansas who--while in the WH--gave Mr. Greenspan and his cohorts unfettered reign for eight regulation-free, bubble-boom, laissez-faire years.
posted by HP LaserJet P10006 at 12:13 AM on April 8, 2010 [4 favorites]

Greenspan elaborated: "If we get it right 70 percent of the time, that is exceptionally good."

Good thing he's not a doctor.

Or an accountant...Wait a minute, he IS an accountant, isn't he?!

(I mean, even a saxophone player who got it wrong 30% of the time would run out of gigs pretty damn quickly.)
posted by Skeptic at 12:44 AM on April 8, 2010

(I mean, even a saxophone player who got it wrong 30% of the time would run out of gigs pretty damn quickly.)

That's called jazz improvisation, my friend.
posted by Joey Michaels at 1:52 AM on April 8, 2010 [3 favorites]

You know who else hated saxophone players?
posted by mek at 2:12 AM on April 8, 2010

You know who else hated saxophone players?

The editors of uncyclopedia?
posted by Joey Michaels at 2:37 AM on April 8, 2010

The problem is that part of the 30% of how often he was wrong is his estimate of how often he was wrong.
posted by srboisvert at 4:07 AM on April 8, 2010 [1 favorite]

If this is his best accounting, I don't want to hear him play.
posted by seanmpuckett at 4:44 AM on April 8, 2010 [1 favorite]

The LA Times shows Greenspan being sworn in before telling a pack of baldfaced lies. When do you think he will be prosecuted for perjury?
posted by 3.2.3 at 5:44 AM on April 8, 2010

Well, Joey, you can excoriate Greenspan all you want, and blast away at inept saxophonists, but implicate jazz improv or free jazz? Them's fightin' words. Roscoe Mitchell, Joseph Jarman, Fred Anderson? Right 100% of the time. No, I don't want them setting fiscal policy necessarily, but I bet we'd all have single-payer 40 years ago.
posted by beelzbubba at 5:48 AM on April 8, 2010

"If we get it right 70 percent of the time, that is exceptionally good."

I read an interview years ago with the head of a major oil company who hoped that he was right 50 percent of the time. When the interviewer balked, the fellow compared his job to that of a baseball player, and who many batters hit .500?

Which should tell you a lot about the mindset.

As to Greenspan, let us never forget that he kept getting reappointed by both parties. My assumption is that both parties wanted to keep the party going and he was happy to spike the punch in exchange for a front row seat at the state of the union addresses. Never underestimate vanity.
posted by IndigoJones at 6:31 AM on April 8, 2010 [1 favorite]

I've been tracking my print reject rate since January 1. So far, it's 0.14%

Chew on that Mr. Master Economist. 30% for me would be "find a new career, ex-printer" time.
posted by Devils Rancher at 6:35 AM on April 8, 2010 [1 favorite]

The problem is that part of the 30% of how often he was wrong is his estimate of how often he was wrong.
posted by srboisvert at 4:07 AM on April 8 [+] [!]

See also: Dunning-Kruger effect.
posted by kcds at 6:41 AM on April 8, 2010

He should just pretend he has dementia. That would have been more believable. "I'm just an old man....What do you want from me? Ehhhhhh...." Though maybe the Mr. Withers defense would have been good: "And I would have gotten away with it too if it hadn't been for you kids!"
posted by anniecat at 6:50 AM on April 8, 2010

Relatedly, does anyone remember a cartoon drawn of Greenspan soaking in a bathtub? I think it was in the Economist but I can't find it now.
posted by anniecat at 6:54 AM on April 8, 2010

the 70% thing. If you were a corporate CEO or hedge fund manager who got things right 70% of the time, you'd be a billionaire, if average loss from getting it wrong is close to your average loss for getting it right.
posted by delmoi at 7:03 AM on April 8, 2010

A lot of disingenuous comments here about the 70% right/30% wrong comment, I guess it's because it's low hanging fruit that's so deliciously snarkable. There is no doubt in my mind that anyone trying to stop the rocketing value of housing in the mid 2000s would have faced near universal condemnation from both the right and the left, no one could have stopped that train without ending up a smear on the track. The fair view is that Greenspan did provide lukewarm warnings, but the warnings were couched or mixed, and the policies he enacted were not necessarily congruent with the warnings, and sometimes ran counter to them. Regardless, even if he was perfectly prescient and saw this coming he could not have stopped it. Can you imagine someone coming in during the mid 2000s saying to put a stop to cheap loans? The right would be all up in arms about the free market and the left would be up in arms about creating a barrier to housing that only the well-off could overcome. The melt-down happened on his watch so to speak, so he bears responsibility. His policies created an environment where the recession was possible, no doubt about that. The ironic thing is that more than 70% of the people qualified for that job would have done the same or worse, and on the off chance we were lucky and had one of the fewer than 30% who could and would have done something, chances are they would have been quite unpopular, or blundered into an entirely different catastrophe (inflation, GDP stagnation, etc). Collectively the US was borrowing tomorrows money to party today, and the party had to end sometime. I'll repeat that Greenspan was responsible for his part in this, but it's unrealistic to think that someone else in his position would have fared substantially better.
posted by forforf at 7:21 AM on April 8, 2010 [2 favorites]

VickingSword, he may have worshipped Ann Raynd, but in practice he really did the opposite of what she probably would have done, which is raise rates in order to make borrowing more difficult. Going with the extreme low rates of interest was more of a James Taggard move more than anything, it made life good for his banking buddies enriching themselves by selling cheap money at expensive money rates.
posted by lonelid at 7:23 AM on April 8, 2010

"Anyone who believes exponential growth can go on forever in a finite world is either a madman or an economist."
-Kenneth Boulding
posted by Pirate-Bartender-Zombie-Monkey at 7:25 AM on April 8, 2010 [6 favorites]

"Anyone who believes exponential growth can go on forever in a finite world is either a madman or an economist."

But wealth isn't finite! An economist told me that... oh.
posted by Pope Guilty at 7:34 AM on April 8, 2010

You know who else was 70% right? GWB

Iraq has weapons of mass destruction.
Iraq was involved in the 9/11 attacks.
The Iraqi war will pay for itself.
We have to fight in Iraq to prevent further terrorist attacks.
We will be greeted as liberators.
We can dismiss the former Iraqi Army and prevent them from having jobs without consequences.
Mission Accomplished.
----
Saddam Hussain was a bad dude.
Bombs go boom.
Bagdad is a funny sounding word. "It's not my bag, dad!"

Oh, that's 30% right.
posted by dances_with_sneetches at 7:41 AM on April 8, 2010

No, no! Dig up, stupid!
posted by TheWhiteSkull at 7:47 AM on April 8, 2010 [1 favorite]

I don't remember Greenspan supporting Bush's tax cuts. I remember him saying it wasn't the right time, that we should wait until the deficit was paid off. But when faced with the choice of go along or get canned, I guess even he went along.
posted by atchafalaya at 8:00 AM on April 8, 2010

Cringley has another good article that could've been included in the FPP:
posted by Ickster at 8:30 AM on April 8, 2010

In economics, being right even 50.1% of the time can make you a millionaire, as long as your wins and losses are the same.
posted by empath at 8:43 AM on April 8, 2010

"Anyone who believes exponential growth can go on forever in a finite world is either a madman or an economist."

It can't go on forever as in billions of years forever, but it damn sure can go on for centuries. Population growth has been exponential, although that will hit limits eventually. Technological growth has been exponential as well. The problem isn't that we demand exponential growth but that we pretended that growth was faster than it actually is -- first accidentally with the tech bubble, but then intentionally, with the housing bubble. Then that was exacerbated by the entire financial sector going completely fucking nuts and pretending that the housing bubble -- which everybody knew was a bubble -- was not a bubble.
posted by callmejay at 8:57 AM on April 8, 2010 [1 favorite]

Population growth has been exponential [citation needed]
Technological growth has been exponential as well. [citation needed]

Seriously, I'm not sure either of these is true. I can't find a good reference one way or the other for the first, but at least it is a matter of fact.

The second is probably a matter of opinion, but if technology growth is exponential, that means the increase in the "level of technology" today [this month, this year] is greater than the increase during every day [every month, every year] in the past. Does anyone really think that's true? Does the release of the iPad really do more to increase the "level of technology" than the invention of the printing press, antibiotics and anaesthetics, steam power, the internal combustion engine, the telegraph, plumbing, the candle, the light bulb, radio?

I think people don't know what exponential growth is, or how unrealistic it is to expect it.
posted by fritley at 9:39 AM on April 8, 2010

But wealth isn't finite! An economist told me that... oh.

Ah, the wonders of fractional reserve banking
posted by Pirate-Bartender-Zombie-Monkey at 9:48 AM on April 8, 2010

It can't go on forever as in billions of years forever, but it damn sure can go on for centuries.

You can't be serious! This is just nuts (as the previous poster said), and in numerous ways.

Looking at a graph measuring any growth aspect of humanity - it goes nearly vertical around the end of the 20th century. We can't keep this up for centuries - I wonder if we can keep it up for decades.

The growth of the economy is fundamentally dependent on the growth of population. If that continues to grow at current rates, we'll have over 60 billion people on Earth in two centuries. It seems clear to me - and to almost everyone else who's studied it - that this number is far, far beyond the carrying capacity of the Earth.

In general, our exponentially growing economy has depending on an exponentially increasing consumption of energy and resources. It's certainly conceivable that we'll come up with new forms of energy; we are not going to be able to come up with new resources, and we are already reaching visible limits in a dozen different areas, from phosphorous to tantalum.
posted by lupus_yonderboy at 9:56 AM on April 8, 2010

Also, it seems obvious to me and to a lot of people that the exponential growth of technology has levelled out - because we are starting to reach fundamental limits.

In many areas, from batteries to nuclear energy to microprocessor speeds, we've gone from rapid breakthroughs to steady, incremental progress.

It's interesting to compare, say, the space program and artificial intelligence. The US managed to get to the moon in 10 years of sustained effort. There have been demonstrations of artificial intelligence since the 50s and yet I'd say we're not substantially closer to understanding how AI would work now than we were in about 1987.
posted by lupus_yonderboy at 10:03 AM on April 8, 2010

Population growth has been exponential, although that will hit limits eventually. suddenly

I don't think you understand exponential growth.
posted by five fresh fish at 10:32 AM on April 8, 2010 [2 favorites]

forforf: There is no doubt in my mind that anyone trying to stop the rocketing value of housing in the mid 2000s would have faced near universal condemnation from both the right and the left, no one could have stopped that train without ending up a smear on the track.

Ah, but you see, that is exactly why the Federal Reserve is insulated from public pressure. That is why, even now, the Federal Reserve is arguing vociferously for its uniquely independent status. That is why the Federal Reserve insists on conducting its affairs in complete secrecy, exempt from congressional review. That is why the Federal Reserve refuses to provide Congress with information about who they are lending to and who is receiving bailouts. The Federal Reserve demands complete independence because, they argue, it is necessary to avoid public pressure so that they can always do the right thing regardless of political pressure. Except they don't do any of that. They just serve the bankers' interests because they are all bankers. Greenspan failed to do his job.
posted by JackFlash at 10:53 AM on April 8, 2010 [3 favorites]

There is no doubt in my mind that anyone trying to stop the rocketing value of housing in the mid 2000s would have faced near universal condemnation from both the right and the left, no one could have stopped that train without ending up a smear on the track.

I dunno, we still remember two words from a single speech of his. The man was nothing if not listened to.
posted by dhartung at 10:58 AM on April 8, 2010

In many areas, from batteries to nuclear energy to microprocessor speeds, we've gone from rapid breakthroughs to steady, incremental progress.

If you mean incremental progress as in 1-2% a year, that's still exponential growth.
posted by empath at 11:14 AM on April 8, 2010