In a recent CNBC interview, former Federal Reserve chairman Alan Greenspan denied his monetary policies preceding the debt crisis had anything to do with the debt/mortgage crisis, and he has “no regrets on any of the federal reserve policies back then.”
You won’t usually find dull economic commentary at jungle, but this flabbergasting statement came from the man once at the helm of one of the most powerful positions on the planet. Yes, the Federal reserve chairman has more power over your day-to-day life than almost any other elected or appointed official—minus maybe the president. Those skeptical of the Fed’s power, wiki this topic and you’ll see the Fed’s purpose and functions include managing the nation’s money supply (wow!), protecting the credit rights of consumers, stabilizing prices (a fine job they’ve done), and maintaining moderate long-term interest rates, among other menial tasks like strengthening America’s standing in the global economy.
The jungle clan, always in search of the authentic message, would like you to ask evaluate the Fed’s performance in recent years. Have prices been stable in recent years? Have the credit rights of consumers been protected?
Greenspan also claims that his rule had nothing to do with the drastic drop in housing prices that occurred from 2000—2003, and claims identical price increases would have occurred if interest rates were not slashed down to historically low levels (from 6.5% to 1%) during that period.
Such statements, even to the laymen, are audacious to say the least. To put it in simple terms, the Fed made borrowing money in America cheaper than ever before when interest rates were lowered to 1%. If borrowing money suddenly becomes cheap and easy, more people will have money to buy houses, and if more people have money, DEMAND rises. Because SUPPLY is finite, prices for homes will inevitably rise. Since the fed dropped rates quickly and abruptly, home prices skyrocketed—no other outcome was possible.
Alan Greenspan, during his reign, had more power over the world’s economy than the most powerful banking CEO’s on Wall Street, yet he either lacked basic understanding of the principles of supply and demand, or is telling lies. He’s either stupid, or a liar, or perhaps both. If he’s any of the three, Americans should be very concerned about our government’s capacity to appoint qualified personnel to such important positions— Alan Greenspan was appointed by Ronald Reagan in 1987.
Hundreds of pages could be written about Alan Greenspan, the Federal Reserve and the economy. Unfortunately, boring ourselves with such subjects is necessary because the Fed directly controls the value of the money in your wallet. Thankfully, little research is required to know Greenspan’s deflection of responsibility is anything but an authentic message.