The Federal Reserve: Instigating Crisis Since 1913
Meet the system responsible for the major financial blunders of the last century.
"In the absence of the gold standard, there is no way to protect savings from confiscation through inflation. There is no safe store of value."
--Alan Greenspan, from an article written in 1966 entitled "Gold and Economic Freedom"
The quote above would indicate a man whose principles in sound economic theory couldn't be compromised. That proved to be dreadfully wrong, as Alan Greenspan turned out to be the most political, Wall Street-pleasing, bubble-inducing Chairman of all time. His reign of power set the stage for the greatest financial collapse in US history.
During his first few years as Fed Chairman he successfully handled the stock market crash of 1987 and George Bush blamed him for losing the 1991 election by keeping monetary policy too tight, causing the 1991 recession. He worked well with Bill Clinton in keeping inflation and interest rates on a downward path, resulting in strong economic growth in the 1990s.
Greenspan's hubris and belief in his own infallibility led him to use monetary policy to "save the world" in 1997 and 1998. During the Asian financial crisis of 1997-1998, Greenspan flooded the world with dollars, and organized a Wall Street bailout of the reckless, irresponsible hedge fund Long Term Capital Management. These choices by Greenspan began two decades of bailing-out failure. The "Greenspan Put" became known throughout the world. Everyone on Wall Street knew you could take excessive risk and if your gamble failed resulting in "systematic risk," Greenspan would flood the system with dollars and save your ass.
After the dot-com bubble burst, the Y2K phony scare and the 9/11 attacks, Greenspan committed the worst offence of his 20-year monetary reign of terror: He initiated a series of interest cuts that brought the Federal Funds rate down to 1% in 2004 and left it at that level for over a year. He purposely created a housing bubble in order to artificially prop up the American economy after the huge stock-market losses. The excess liquidity unleashed by Greenspan caused lending standards to deteriorate, resulting in the housing bubble of 2004-2006 and the market meltdown beginning in 2008. His loose monetary policy resulted in a plunging dollar, surging commodity prices, and humungous trade deficits.
Greenspan's unyielding belief in unfettered markets, unregulated derivatives, adjustable-rate mortgages for all, home-equity extraction as a spending source, and subprime lending to low-income people combined to cause a financial crisis that still threatens to destroy the American financial system. He denies responsibility for the financial crisis, but his speeches clearly point to his guilt.
Alan Greenspan sold his soul to the devil of Washington DC power and influence. He loved the accolades and headlines he received as the most powerful man in the world. The Maestro could pull the levers and make markets do as he wished. The man who knew that Federal Reserve manipulation caused the Great Depression disregarded his own words from 1966 and caused the worst economic calamity since the Great Depression.
The information on this website solely reflects the analysis of or opinion about the performance of securities and financial markets by the writers whose articles appear on the site. The views expressed by the writers are not necessarily the views of Minyanville Media, Inc. or members of its management. Nothing contained on the website is intended to constitute a recommendation or advice addressed to an individual investor or category of investors to purchase, sell or hold any security, or to take any action with respect to the prospective movement of the securities markets or to solicit the purchase or sale of any security. Any investment decisions must be made by the reader either individually or in consultation with his or her investment professional. Minyanville writers and staff may trade or hold positions in securities that are discussed in articles appearing on the website. Writers of articles are required to disclose whether they have a position in any stock or fund discussed in an article, but are not permitted to disclose the size or direction of the position. Nothing on this website is intended to solicit business of any kind for a writer's business or fund. Minyanville management and staff as well as contributing writers will not respond to emails or other communications requesting investment advice.
Copyright 2011 Minyanville Media, Inc. All Rights Reserved.