A martyr for the cause

The Man who may say defined the art of Central Banking admits "he didnt understand the financial Markets"! People say the former Federal Reserve chair is just trying to save his own skin – I think he's trying to save ours First they came for the short-sellers, and I did not speak up because I wasn't a short-seller. Then they came for the bankers, and I did not speak up because I wasn't a banker. Then they came for Alan Greenspan, and he rolled over, said sorry and provided some much needed confidence in a crisis-laden market. Yesterday, Greenspan told the House oversight committee that he took some of the responsibility for the current turmoil by admitting his prior lack of elucidation on the subject of regulation. Today, the press has mostly been deciding not only whether he was right or wrong but whether he actually admitted he was right or wrong. The thing with the economy is that because it involves money, it is seen as a science – a thing to be right or wrong about. Yet the variables in the economy – indicators such as consumer confidence or unemployment – are just extrapolations of theories that give a general idea of the state of the economy, not a definitive answer to its problems. Obviously much of the press attention has been devoted to the dichotomy of blaming Greenspan for the current turmoil, having previously worshipped him as the god of all things shiny and bling. Yet very little has been devoted to why he has made this confession – why a retired official, two years out of office, would return to take some of the current deadweight on his shoulders. It is interesting to look at Greenspan's reputation. He is almost universally seen as the man who led the way through the stock market crash of 1987 and the dot.com boom/bust crisis of 2000. However, according to the New York Times, he says he refuses to accept blame for the crisis. Is it not strange for a man so universally revered for the biggest period of growth in capitalism's history to suddenly step up and take responsibility? At 82 years old, with an almost religious following, would you take responsibility for an international financial crisis the likes of which we haven't seen for 80 years? I hope so. At this stage in the meltdown, people like Greenspan know better than anyone else the options available to US, European and UK banks and treasuries. The options are limited. They can ban short-sellers, but to what end? It quickly became clear that the short-selling ban was merely an attempt to prove that something was being done. So what else is there to do? The injection of billions of dollars into banks might allow some further liquidity to allow business to continue but it does little to allay panic. Greenspan has martyred himself for the cause. He has presented himself to congress as a part of the problem. By suggesting he has made mistakes he is allowing for the recognition that his absence from the Federal Reserve might precipitate some positive changes to the economic system. Greenspan's most important role at the Federal Reserve was to inspire confidence through bad times: a job that he continues, unpaid, today. Many people say he's just trying to save his own skin; I think he's trying to save ours. Not only have individual financial institutions become less vulnerable to shocks from underlying risk factors, but also the financial system as a whole has become more resilient.” — Alan Greenspan in 2004