I love when Greenspan sends his warning signals. A little late, Mr. Maestro!
"Former Federal Reserve Chairman Alan Greenspan said the recent rise in Treasury yields represents a 'canary in the mine' that may signal further gains in interest rates. Higher yields reflect investor concerns over 'this huge overhang of federal debt which we have never seen before,' Greenspan said in an interview today on Bloomberg Television’s 'Political Capital With Al Hunt.' 'I’m very much concerned about the fiscal situation,' said Greenspan, 84, who headed the central bank from 1987 to 2006. An increase in long-term interest rates 'will make the housing recovery very difficult to implement and put a dampening on capital investment as well.'"
"Alan Greenspan told a panel investigating the causes of the financial crisis Wednesday that steps can be taken to limit the impact of another shock, but the former Federal Reserve chairman warned that regulators can't fully prevent another crisis from happening. In written testimony presented to the Financial Crisis Inquiry Commission, Greenspan said the recent crisis highlights the limitations of government oversight in the financial markets. 'Regulators cannot successfully use the bully pulpit to manage asset prices, and they cannot calibrate regulation and supervision in response to movements in asset prices," he said. "Nor can they fully eliminate the possibility of future crises.'"
Yes, Maestro Greenspan, but they can stop printing money.
"Greenspan was a big cheerleader for adjustable-rate mortgages in 2004. He dismissed the idea that record levels of household debt were a problem as long as people could service it, courtesy of his super-low interest rates. He repeatedly rejected the notion of a housing bubble, admitting belatedly that there might be some “froth” in the residential real estate market. He gave political support to the Bush tax cut in 2001 because -- get this -- unless the government reduced taxes, there would be no more Treasuries for the Fed to buy to conduct monetary policy! He refused to raise margin requirements in the late 1990s to defuse the technology stock bubble, arguing publicly it would have no effect. (Privately, he acknowledged it would curtail the bubble but might nail the economy in the process.) He advocated a “risk-management” approach to monetary policy and failed to exercise even a modicum of risk- management during two asset bubbles on his watch. Could anyone have been more wrong about so many things than Alan Greenspan? And now he has the chutzpah to rewrite history? He will certainly give it another whirl at today’s hearing of the Financial Inquiry Crisis Commission."
Caroline Baum, Bloomberg