Alan Greenspan – nicknamed “The Maestro” for the way he “conducted” the economy – is changing his tune:
- One of the main cheerleaders for credit default swaps, he now admits they are extremely dangerous
- Greenspan previously argued that economists had conquered the business cycle, and that modern, technologically advanced financial markets are best left to police themselves. But he now says that we’re in the worst crisis since the 1930’s (modern technology didn’t help), that regulation is needed, and that banks will need to be nationalized
- And last, but not least, the man who preached that a new bubble be blown every time the last one bursts is now warning against the government incurring too much debt:
“Much of the fiscal deficit is being funded by foreigners who see U.S. government debt as the ultimate safe haven in all this turbulence,” Greenspan said. “The long American history of honoring our obligations, dating back to Alexander Hamilton, remains a powerful attraction to foreign investors. But there is obviously a limit to the expansion of U.S. federal debt.”
For years, the Maestro told us that the music was not out of tune, that it was simply a new, better type of music. Now that the charade has ended, and economists grounded in reality are speaking up, it is obvious for all to hear that Greenspan was horribly out of tune after all.