Greenspan's Bubbles: The Age of Ignorance at the Federal Reserve
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Greenspan's Bubbles: The Age of Ignorance at the Federal Reserve Customer Reviews
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♥♥♥♥♥
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devastating
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Here are some impressions I had:
1). My experience in reading the book exactly matched that of the reviewer who said it was slow going in the early chapters and then excellent and engaging in the middle and late chapters. The early part came across to me as muddling through the early part of Greenspan's reign in what I found to be a somewhat disjointed manner. Also, it seemed to me the author did not make a compelling case showing gross ineptitude on the part of Greenspan during that period. Probably there is not too strong a case for that.
2). As the story entered the mid to latter stage of the tech bubble and subsequent housing bubble, it became thoroughly engaging and I was unable to put the book down. And in this material the author built an unassailable case that Greenspan's performed his job with virtually total incompetence. And, as the author amply substantiates, Greenspan adds insult to injury by promiscuously redefining himself and his past in order to immunize himself from responsibilty for the wreckage he has caused to the economy.
3). Judging from the other reviews, there is unanimous agreement as to Greenspan's incompetence. The one main controversy is to what extent the Fed Chairman is responsible for the bubbles and to what extent are other players (e.g. other regulatory agencies, investors, analysts, speculators, whatever) responsible. I would say on this matter that the author to some degree took it as self-evident that the Fed Chairman's actions were the primary causes of the bubbles. That is not unreasonable since it is widely accepted that the powers wielded by the Federal Reserve have a dominant influence on the macroeconomy. (certainly, that is the INTENT of those who created the Fed) However, it does seem that it is a legitimate matter for debate as to whether, for example, certain interest rate shifts during the tech bubble were as significant as Fleckenstein appears to believe.
4). A couple of interesting issues that were raised in the book are:
a). The adjustments made to Consumer Price Index formulas that are highly suspect. Fleckenstein indicates that three changes were made. One was to go from arithmetic to geometric compounding, which seems to me to be a correct change to have been made. The other two are questionable:
- Substitution
- Hedonics
I don't fully understand how those two are implemented but both do appear highly suspect.
b). Much of the basis for Greenspan's nonchalant attitude toward the tech bubble was his notion that it was justified by massive productivity growth created through the use of new technology. Fleckenstein provided persuasive evidence that that productivity growth was in fact bogus, based on faulty analysis.
I knew essentially nothing about the Fed back then, and so most of the events discussed in the book are ones I was not particularly tuned into at the time, but I do remember all the brouhaha about the massive productivity gains we were experiencing, and I guess it was Greenspan who was the one most vocally peddling that (apparently erroneous- as just about everything else he has ever said) message. |
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