Tuesday, December 18, 2018

Alan Greenspan - "Run for Cover"

Former fed chairman, Alan Greenspan, the guy who could do no wrong until he could do no right, is adding his voice to the choir of investment types who see a bad moon rising for the American economy.
Former Federal Reserve Chairman Alan Greenspan warned on Tuesday that the U.S. could be headed into "stagflation" and that it was unlikely the current market would go higher. 
“It would be very surprising to see it sort of stabilize here, and then take off again,” Greenspan said in an interview with CNN. Markets could still go up, but “at the end of that run, run for cover.”

Trump, who hasn't missed a chance to credit himself with America's skyrocketing markets is already positioning himself to be able to blame fed chief Jerome Powell for the looming collapse.
In the CNN interview, Greenspan said the U.S. could be headed into “stagflation,” an economy characterized by high inflation and high unemployment such as was seen in the 1970s. 
“How long it lasts or how big it gets, it’s too soon to tell,” said Greenspan.


Hugh said...

The high inflation of the 1970's was followed by high interest rates. I'm not sure how high interest rates would work today with debt levels now so much higher.

The Mound of Sound said...

A lot of us remember those days, Hugh. They were punishing but instilled in many a sense of prudence that has faded in the 21st century. I've found it cringeworthy how some young people have a cavalier attitude toward debt. I've tried to explain that property values are notional, rising and falling with market fluctuations, but debt, that's as solid as concrete.

Brian Dundas said...

Yes, imagine early 80's interest rates with today's debt.


As an aside, I invite you to sample www.idiotorcharlatan.com for Ep. 1 on this very topic (no, not the economics - far beyond my pay grade - but the doofus of whom we speak!)

Anonymous said...

Love the post-truth era. Fake Experts can say any ridiculous thing and it becomes Official Truth: i.e., crap that monkeys can put in their hands to throw at their political enemies – whom their fiercely hate while carrying around "STOP THE HATE!!" protest signs.

But if anyone is capable of reasoning, here are a few simple facts. The high inflation of the 1970s was caused by oil price shocks. From 1973 to 1982 the price of oil rose 800% and general prices rose 100%. (Is that a lot of inflation or a little inflation given the magnitude of the price shocks? No economist has a clue – although in the real sciences, they tend to quantify systems like this so that they do.)

So back then you had inflation over 10%. There was nothing that could be done to control it. It was caused by external price shocks. (Not by an internal overheating economy.) All that could be done was to wait them out and let the economy eventually absorb them.

Today central banks have a 2% inflation target. (Many mainstream economists, like Paul Krugman, have complained the Fed treats the 2% target as a ceiling rather than an 2% average with a 3% ceiling. They also call for a 4% inflation target on the basis the 2% one turned out to be too low requiring extraordinary measures like "Quantitative Easing" when monetary stimulus could no longer be achieved by lowering interest rates. They hit the rock-bottom "zero bound" after the 2008 economic collapse requiring some form of negative interest rate for stimulus. – Not that monetary stimulus is an efficient or effective form of aggregate-demand control. This is another failed Friedmanian ideology.)

So the idea that 10% inflation is around the corner is completely and utterly absurd. Of course, Greenspan is a crook who played a key role in the 2000s Housing/Derivatives Bust Out that culminated in the 2008 global financial meltdown. (Oops! Didn't mean to scam homeowners, taxpayers and investors out of trillions of dollars. No one's perfect!)

"Stagflation" is also fake concept. Central banks waged a war on inflation (and workers) by jacking up interest rates to absurdly high levels beginning in 1973. They reached a peak of over 20% during the Volcker Shock in the early 1980s. THAT is what caused high unemployment. Not the inflation itself. (Real worker incomes peaked in 1973! The war on inflation has driven them steadily downwards and inequality up. Stagflation = premeditated stagnation.)


Anonymous said...


The alt-right/libertarian lynch mob has been warning against high interest rates since they wrecked the economy in the Great Recession. Didn't happen then, not happening now.

Anonymous said...

quote attributed to Alan Greenspan - "We really can't forecast all that well, and yet we pretend that we can, but we really can't."


Anonymous said...

He sanctioned the word "Precariat".

Anonymous said...

I suggest a book written by Joyce Nelson.a Canadian..."Beyond Banksters". Anyong

Troy said...

Trump, moronic as he is, is only partially to blame for the oncoming market troubles. Much of what Greenspan is predicting (finally - after years of better economists already making the prediction that around now is when Greenspanian economic policies would finally implode) is for the most part baked in, pounded into the dough of US domestic policy by three decades of neo-liberal voodoo economics.

As for stagflation, if it happens, the solution is much the same: jack up interest rates to remove the make-belief capital corporations boast from the market. And no bailouts! That'll learn 'em, the greedy effs.

Labor will take a hit (as usual), but labor is under water anyway, if not already drowned. The employment numbers federal governments in the US (and Canada) boast are hardly honest.

The entire banking system in the US needs to be rebuilt. Take out the banks much as Teddy Roosevelt and later on FDR did. Reinstall the rules that worked which allowed the USA industry to florish in the 1950's. The world needs that USA (sans segregation, of course - no one sane wants _that_ back).

Trump is the wrong president for the job. Well, he's the wrong man for any job. Better to shift him to the basement with his red stapler, and forget about him entirely.

I hope for a Democratic ticket of Sanders-Warren. Or even a pleasant surprise where there's a choice of progressive voices in the Democratic primary.

Hugh said...

The US recently raised their interest rate, but it's still pretty low. Raising the rate significantly would blow up the system. Low interest rate results in more debt accumulating.

Northern PoV said...

At last we get a little of the 'campaign-Trump' for. policy.
(Syria/Afghanistan withdrawals )

It took a Nixon to go to China (as they say)
perhaps it takes a Trump to withdraw the US war machine from the middle east (and elsewhere?)

Not a big fan of tRump, and am thankful I ain't a Yankee suffering his domestic policies
- but remember... Pres. Hillary would be likely in the middle of one or more wars by now.
Merry Christmas

Here is where the rubber hits the road. tRump now a real threat to status quo.
All of a sudden, the sex, Russia, $$ scandals will be useful tools to attempt a r-w coup
I'm sure Pence is ready to pounce and fix all this -

Hugh said...

"But if things go poorly, and the economy doesn't grow as fast as federal officials predict, then the deficit could get worse until 2034.

The report says federal finances appear sustainable over the long term, with the Liberals' favoured fiscal number, the federal debt as a percentage of gross domestic product, expected to decline over time. That's a way of measuring how heavy the debt burden is compared with the size of the national economy rather than just tallying the total the federal government owes."


So everything will be fine as long as GDP grows every year, for ever.