for Wrecking World Economy
Admits "harebrained" scheme of credit-dependent economic growth "a
iTulip.com Bulletin - April 1,
speaking to a group of unemployed automobile parts factory workers in
Ohio and homeless ex-venture capitalists in California's once
economically vibrant Silicon Valley via a free Internet seminar, ex-Fed
Chairman Alan Greenspan apologized for creating a
system in the mid 1990s, dependent on leverage and asset speculation,
that collapsed in 2007. The implosion occurred when Iran,
and Russia together cut off
to the U.S. after
Security Advisor Condoleeza Rice referred to Russian President Vladimir
Putin, Venezuelan President of Hugo Chavez and Iranian President
Mahmoud Ahmadinejad as “The Three Oil Stooges,” in
a speech to students
at Georgetown University in Washington, DC. She likened the
President to Three Stooges character Mo Howard, stating “He
leader of the group, just like Putin.” Since then,
Venezuelan have been selling the balance of their oil to China.
spiked inflation and interest rates, collapsed the dollar and created
the worst economic calamity in history. Global trade fell 53%
two years, inflation and interest rates soared to double digits and
unemployment increased to over 20% in most Western countries.
National Security Advisor Rice later explained, “I was just
In unusually comprehendible comments during his seminar, Greenspan
said, “We thought we had it right. Similar
based monetary schemes had been tried before over the past thousand
years or so. They didn’t work out,
either. Looking back,
our mistake was that we didn’t see the obvious parallels to
past. We thought we finally got it right, we’d
ironed out the
bugs. But things got out of control."
A seminar participant asked Greenspan during a brief Q&A
what led him to conclude that something was wrong.
Greenspan replied, "Mortgage companies were financing speculators to
flip condos in Florida four times before they were built.
equity firms were financing speculators to flip $1B companies over and
over. The money poured into big houses in Connecticut and
New York, hedge funds in the Cayman Islands, even yard sale junk on the
Antiques Roadshow. At the end of one show, a guy who brought
crap wooden horse he inherited from his grandparents is surprised when
the appraiser tells him it's worth $50,000. You can see the
is thinking, “Who’d pay $50,000 for a crap wooden
horse?” But I
knew. A hedge fund manager, that’s who."
"That and the fact that the Fed's email spam filtering system became
completely clogged with 'Refinance Your Home Now Before Rates Go Up!'
and 'Consolidate Debt Now!' email," Greenspan added.
Greenspan stated that he does not blame the new Fed Chairman Ben
Bernanke for current conditions. "When Ben took over, he was trying to
put a stop to it, gradually. He wanted to create a soft
landing. The Mo Howard thing was a random exogenous
Greenspan explained that Bernanke had to continue raising interest
rates to keep inflation in check. "Inflation increased to
double-digit rates in 2007 as commodity prices continued to
surge. Commodities inflation was balanced out within the U.S.
economy by cheap imports from slave laborers in totalitarian
China. To keep foreign investment flowing, especially from
and cheap goods coming in, Ben had to keep raising rates.
However, high interest rates slowed U.S. consumer spending and pushed
the U.S. economy into recession. Economic growth that lowered
risk premium on U.S. debt and
consumption of exports were the only reasons why China was buying U.S.
financial assets, so they stopped and now export more goods to the rest
Asia, Europe, the Middle East, South America... you know... everywhere
“The system was absurd. It’s not
Ben’s fault,” Greenspan
added. “It’s my fault. The
system was stupid, a failure.”
Fed Chairman Ben Bernanke, who took over for Greenspan in 2006,
commented, “I got this job because of my strong academic
a scholar of The Great Depression. I got a lot of press on
this. ‘Bernanke is a student of The Great
made sure this got reported over and over. New York Times,
Street Journal, and so on. Get it? Everyone knew I
big challenge on my hands. Lately I’ve been
studying up on the
collapse of the Weimar Republic.”
The free nature of the online seminar was in sharp contrast from
Greenspan’s speaking engagements that immediately followed
departure from the Fed in 2006. He then earned
on the lecture circuit, for example reportedly earning $120,000 for a
two-hour televised broadcast to clients of CLSA, the Asian
investment-banking unit of France's Credit Agricole, and more than
$100,000 for a speech to select customers of ABN-Amro in