BEST OF DOUG NOLAND

August 30, 2005

Truth be told, Mr. Greenspan is a monetary policy radical. He presided over the greatest expansion of speculative finance in history, including a Trillion dollar hedge fund community, bloated Wall Street firm balance sheets approaching $2 Trillion, a $3.3 Trillion repo market, and a global derivatives market surpassing an unfathomable $220 Trillion. During the late-nineties, when leveraged speculation was heavily infiltrating the financial system, he became the leading proponent of the "New Economy." He became a powerful advocate of derivatives and Wall Street finance, all the time avoiding any discussion of the impact these new financial instruments and practices were having on Credit growth, marketplace risk perceptions, speculation, asset prices and the underlying structure of the economy.

Greenspan has stood idly as our Current Account Deficit has ballooned to almost $800 billion annually, with foreign central banks accumulating several Trillion dollars of claims on our economy. He watches as crude approaches $70. And now he warns us against the scourge of "protectionism," an inevitable response to the gross global imbalances his activist inflationary policies have fostered. He ignored the most reckless of mortgage lending Bubbles, and now warns us that prices, market liquidity and wealth/income ratios may not be sustainable. Worse yet, he is arguably guilty of committing the ultimate in central banker derelictions by targeting household mortgage borrowings as the primary mechanism for his post-technology Bubble "reflationary" policies (policy error begetting ugly error). The "greatest central banker" incited history’s greatest real estate borrowing and speculating Bubble, a legacy our financial system and economy will have to live with for decades.