24 Jul 2014

Greenspan Says Bubbles Can’t Be Stopped Without ‘Crunch’ - Former Top Bankster Shill Worries About False Dawns and The Looming Fed Exit

He suffered a remarkable fall from grace after leaving office and has apologized for trusting big banksters too much.
MarketWatch: Former Federal Reserve Chairman Alan Greenspan has always been a student of the economy. Since the financial crisis, he’s become a student of human nature.

Sitting in his office with a view of the Washington Monument in the distance, Greenspan is eager to share the insight distilled in his recent book, “The Map and the Territory,” due out in paperback this fall.
Greenspan, 88, who was chairman of the U.S. central bank for more than 18 years, from 1987 to 2006, managed to steer the economy through multiple crises, mainly by slashing rates and remaining upbeat. He suffered a remarkable fall from grace after leaving office and has apologized for trusting big banks too much. He has since gone back and re-examined his views on the economy.

Greenspan, now the president of Greenspan Associates LLC, an economic consulting firm, spoke to MarketWatch about the current stance of Fed policy, the economy and what to do about asset bubbles. The economy will do all right in the near term, he said, buoyed by a strong equity market, but he added that he remains worried that we could be facing another false dawn.

The interview has been edited for length and clarity.

MarketWatch: What is the biggest challenge facing the Fed?

Greenspan: How to unwind the huge increase in the size of its balance sheet with minimal impact. It is not going to be easy, and it is not obvious exactly how to do it.

MarketWatch: As the Fed is looking at the exit, do you think we can get through this without upsetting the economy?

Greenspan: I certainly hope so. I certainly think they will. But it is going to be difficult.

MarketWatch: Do you expect a sharp market reaction to the first hike?

Greenspan: Of course. Look what happened when the first indication of tapering occurred. Markets have always been sensitive. They reflect animal spirits.

MarketWatch: Will the Fed’s communication to markets be key here?

Greenspan: I am not sure. One area I was always doubtful about during my tenure is how much we could effectively communicate to markets, because they were always second guessing the Fed. It was a battle, and I am not sure we always won. 

Edited by WD 

Angelo: Anyone for crunchy bubbles? I always thought they squeaked or popped and that mathematics was either easy or impossible, never difficult or as with the new normal, incomprehensible. ;) As usual the top bankster shill would have you believe otherwise in his interpretation of the blatantly obvious and inevitable. (Cough, ..END THE FED!)

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