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Commentaries & market updates.
The lies a Fed chairman tells
The lies a Fed chairman tells
The following is a list of some of the lies told by Alan Greenspan during
his congressional testimony earlier this morning.
1. “The U.S. is a self contained economy.” How can an economy with
a current account deficit of over 500 billion dollars per year and rising be
a “self contained economy?”
2. “The U.S. is the most productive economy in the world.” How can
the U.S. be the most “productive economy in the world” if we produce
so little that each month we must import 40 billion dollars worth of merchandise
more than we export?
3. When asked whether he was worried about the falling value of the dollar,
Greenspan replied that administration policy only allows the Secretary of the
Treasury to comment on the dollar. This is ridiculous. First of all, the Fed
is independent. Neither the President not the Secretary of the Treasury can
enforce what amounts to a gag order on Greenspan. Secondly, the Fed is in charge
of monetary policy, not the Treasury. How can the person in charge of monetary
policy not be allowed to comment on the value of our money? Finally, how can
the person in charge of maintaining the integrity of the dollar not be concerned
when it loses value, especially given the enormity of the current account deficit,
and the importance of a strong dollar in continuing to finance it?
4. While Greenspan conceded that larger deficits could result in higher interest
rates he seemed to minimize the relationship. Interest rates, like all prices
are determined by supply and demand. As the supply of government bonds increases
the price of those bonds will always be lower than the price which would have
prevailed had the supply remained the same. Interest rates are the inverse
of bond prices.
5. When asked if higher property taxes might hurt the housing market, Greenspan
basically replied no. Obviously anything that increases the cost of owning
a home is a negative for the housing market. Greenspan handles the housing
bubble with kid gloves, not wanting to say anything that might prick it.
I’m sure Greenspan told more lies, but I was too busy working to watch his
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