Greenspan shrugged off

October 21, 2013

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Based on the reviews of his new book “The Map and The Territory”, Alan Greenspan’s stock has fallen precipitously since he left the Federal Reserve to widespread acclaim in 2006.

Bloomberg’s Daniel Akst calls the book infuriating, writing that the “plodding text oscillates maddeningly between equivocation and chutzpah”. Akst slams Greenspan for calling the financial crisis “almost universally unanticipated”, despite what Akst says were “a host of indicators that were pointing to trouble”. Akst is frustrated that despite the book’s subtitle (“Risk, Human Nature, and the Future of Forecasting”), and the author’s self-professed expertise in economic forecasting, how Greenspan could have not seen danger ahead is barely explored. Furthermore, Greenspan’s claimed concern for federal deficits is undercut, Akst writes, by his endorsement of both of President Bush’s rounds of tax cuts.

The WaPo’s Steven Pearlstein says Greenspan’s effort at introspection simply yields a reiteration of his prior “unshakable faith in free markets, an antipathy toward market regulation, and a conviction that progressive taxes and social spending are to blame for slow growth, stagnant wages and exploding deficits”.

Paul Krugman expands the criticism, pointing to “Greenspan’s amazing track record since leaving office — a record of being wrong about everything, and learning nothing therefrom”. Greenspan’s refusal to accept responsibility for his misjudgment makes him, in Krugman’s view, not just a “bad economist… he’s being a bad person”.

In office, Greenspan saw no credit risk in Fannie or Freddie, and made no indication that a housing bubble, undercapitalized banking system, or securitized assets posed any risk whatsoever to the US economy. Since leaving office, Greenspan predicted in 2010 that US would quickly become the next Greece. He has also argued in favor of austerity, both in the US and UK, despite the fact that austerity killed Europe’s nascent recovery, and pushed up the US unemployment rate while dragging down growth.

Larry Summers is disappointed that Greenspan hasn’t changed his anti-Keynesian views, but lavishes (projects?) praise on the intellect of a man he had the “privilege to work closely with”. Summers writes that “Greenspan’s range, vision and boldness is especially important at a time like the present, when Washington is preoccupied with the political and petty”.

The NYT’s Binyamin Appelbaum thinks Greenspan has found a kernel of an interesting idea when he discusses the economic consequences of human irrationality. But Appelbaum laments that Greenspan dwells on this topic for just a single chapter and instead spends most of the book retreading old, largely discredited ideas like tax cuts to spur business investment. — Ben Walsh

On to today’s links:

Magnetar goes long a small Ohio town, while shorting its tax base – Bloomberg

A byproduct of Japan’s experiment in economic stimulus: increasing inequality – Bloomberg

It’s actually (sometimes) a good idea to eat in empty restaurants – Tyler Cowen

Be Afraid
Your new candidate for the next credit crisis: Thailand – Euromoney

Growth Industries
The fracking boom won’t do much for climate change. But it will make us a bit richer – WaPo

Get ready to use credit card reward points in taxis (and everywhere else) – Techcrunch

Steve Cohen and Guy Fieri went to the Super Duper Weenie together – NY Post

Sad But Probably True
“Ethics only gets you so far in banking” – WSJ

Right On
“At a Death Cafe people, often strangers, gather to eat cake, drink tea and discuss death” – Death Cafe

No one reads tablet magazine apps – Adweek

Crisis Retro
Predatory lending practices increased sub-prime default rates by about a third – NBER

GWU admits its undergrad admissions process is not “need blind” – The GW Hatchet

Old Normal
Mapping the most syphilitic states in the Union – Slate

It’s Academic
Private schools are good at demographic selection; public schools are better at education – The Atlantic

Data Points
$47 billion in 7 weeks: ETFs see huge inflows – Bloomberg

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