Greenspan admits, with a chuckle.
Date: Saturday, September 22 2007
by Gary North
Alan Greenspan's autobiography was released on September 17. He was interviewed by Leslie Stahl on September 16 on CBS's "60 Minutes," for what has to be the most successful book promotional appearance I can remember.
The book's title is The Age of Turbulence. Yawn. The guys in the marketing division should have insisted on Straight Talk – Finally.
Mr. Mumbles at long last has come clean about what I had said for almost two decades: his mumbling was deliberate.
"I would engage in some form of syntax destruction, which sounded as though I were answering the question, but, in fact, had not," Greenspan admits, with a chuckle.
At one hearing, Greenspan said, "Modest pre-emptive actions can obviate the need of more drastic actions at a later date, and that could destabilize the economy."
"Very profound," Greenspan says, after listening to his testimony.
I like the phrase, "syntax destruction." The master of this art – the mixmaster – was President Eisenhower. He was equally deliberate. He was perfectly content to be ridiculed by the press as a verbal incompetent. He played the press like the puppets they really are. Greenspan did the same, with equal success.
In the interview, Stahl referred to his advance on the book's royalties: $8 million. Even I was stunned. If he was paid top royalty – 15% – then at $35 per book, the publisher needs to sell over 1.5 million copies in hardback just to break even. This advance was extraordinary for an autobiography. It indicates just how influential he was and remains.
She asked him which currency he would prefer to be paid in. He said he plans to diversify. That was a way of saying, "I will not stick with the dollar 100%." He has the picture.
I do not begrudge him his $8 million. It was clearly worth that to get him out of the Federal Reserve System. I do begrudge the way he got it: by presiding over the FED and relying on monetary inflation to bail out the stock market in 1987, 1990–91, and 2000–2004.
He said that he did not grasp what was happening in the subprime mortgage market until late 2005. Stahl did not know enough to ask him why he did not recognize that a federal funds rate falling from 6.5% in mid-2000 to 1% in mid-2003 was inevitably going to produce arbitrage opportunities between the short-term rates and long-term, just as yen carry trade did, beginning in the early 1990's. The strategy of "borrow short, lend long" created the savings & loan bust in the mid-1980's in the United States. Why did he think it would be different after 2000?
Both Stahl and Greenspan kept coming back to Greenspan's love of economic statistics. The show's Greenspan segment ended with this:
When he's not working these days, he does what he's always done to relax: he flips through government reports with all those geeky numbers.
"He loves these data. I mean, I mean look at this stuff here," his wife, Andrea Mitchell, tells Stahl, looking at his morning reading, including a report from the Bureau of Labor Statistics.
"I just love getting into the detail of what the . . . say, protein content of hard red winter wheat was because – the differential in price. The differential in price between . . . ," Greenspan says.
"It's very romantic," Mitchell remarks.
." . . Kansas City and Chicago was. . . ," he says laughing. "No, it was romantic to me. That's what the joke is. And I'm still that way. I really just love that stuff."
This was Greenspan's problem for two decades: a preference for data that were separated from a coherent economic theory of the business cycle.
When he was a young economist in the 1960's, he was a devoted advocate of the gold standard. He understood cause and effect in economic theory. He understood how monetary inflation distorts the capital structure, leading to booms and busts. But, at his accession to the Chairmanship of the Board of Governors in 1987, his personal love for, and deep faith in, economic statistics overcame his mid-1960's faith in stable money as a matter of economic principle. He adopted the print-and-spend policies that have plagued every nation that has adopted central banking, which is all of them except Monaco and Andorra.
[Proofreader’s note: this article was edited for spelling and typos on September 24, 2007]