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USA Today says that former Federal Reserve Chairman Alan Greenspan thinks a stock market rally will do more to boost the economy than various direct stimuli. Huh? He must be slipping severely. The federal government and Federal Reserve have been manipulating stocks since 1987, not long after Greenspan took over the Fed. The day after the 1987 crash, officials quietly manipulated stocks back up by buying stock futures. Shortly, the Reagan administration set up a committee to "observe" the stock market. That committee became variously known as the crisis control team or crash control team. It intervened to stem selloffs numerous times during Greenspan's term, and also the term of his predecessor, Ben Bernanke. Wall Street enthusiastically endorses Greenspan's proposal. Of course. Something like 80% of stock market wealth is controlled by a small percentage of people. They always use the argument that 50% of the public owns stocks directly or indirectly. That may be true, but 50% of the public (minus the top 4 to 5%) controls a small fraction of market wealth. So stimulating the economy by goosing stocks only benefits the chosen few -- the same ones who support Greenspan and his crowd. It won't stimulate the economy to any significant degree.

But the main problem with government and the central bank boosting stocks is that it can backfire. During the late 1990s, when tech and dot.com stocks were selling for wildly absurd prices, and I was trying to point that out, many people said they weren't worried: the government wouldn't let the market fall. Wall Street said the same: Greenspan wouldn't let it fall. It was called "the Greenspan put." But stocks crashed in 2000 and again in 2007-2008. The last thing any market wants is the big players believing it can't fall. History tells us that is when it plunges. Greenspan should read his history -- some of which he made himself.

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HonestGovernment Sept. 27, 2010 @ 7:21 p.m.

Thanks for this, very much. I only wish that Andrea Mitchell would interview hubby Alan in her a.m. MSNBC slot, and go after him with the same acerbic lead-in questions that she uses to sneer at Pres Obama.


SurfPuppy619 Sept. 27, 2010 @ 8:04 p.m.

Can we stop calling him "Mr. Greenspan" and refer to him under his true name, "Mr. Bubble".

And yes, and interview from Mrs. Bubble with her husband, asking him why he left interest rates so low for so long might help us learn to NOT make the same mistake again..............


Visduh Sept. 27, 2010 @ 8:17 p.m.

How the mighty have fallen. Woodward wrote a bio on "Greenleaves" entitled Maestro, and basically said that Al was an economic genius. (Read that paean to G, and you should never place much credibility in Woodward again. And that's true retroactively.) Even a former U-T columnist with the initials DB shared that enthusiasm about G for a time. Gradually it came to pass and became painfully obvious that he was no genius, unless you wanted a series of economic bubbles, more painful each time that the previous time. There were those who claimed that G had brought the economy to a soft landing but when it really hit the ground in 2000 and again in 2007, there was nothing soft about it. The grounding hurt, and still does.

When Al passes from the scene, his place in history will be either one of being utterly forgotten, or being remembered in the same way that James Buchanan, Warren Harding, and Jimmy Carter are (or should be) remembered.


Don Bauder Sept. 27, 2010 @ 11:35 p.m.

Response to post #1: Won't happen. Also, I made an error, saying Bernanke was Greenspan's predecessor. He was Greenspan's successor, obviously. Best, Don Bauder


Don Bauder Sept. 27, 2010 @ 11:37 p.m.

Response to post #2: Yes, he said there was no housing/subprime bubble. Missed the stock market bubble, too. In fact, tried to explain the tech/dot.com bubble away while it was still expanding. Best, Don Bauder


Don Bauder Sept. 27, 2010 @ 11:38 p.m.

Response to post #3: Guilty as charged. For awhile, I thought Greenspan was doing a very good job. Best, Don Bauder


David Dodd Sept. 28, 2010 @ 1:02 a.m.

Re #6: Greenspan did an outstanding job, he did everything the Government wanted him to do. When did I come to realize that he was no good? When he began to work for both sides of the aisle.


Don Bauder Sept. 28, 2010 @ 9:08 a.m.

Response to post #6: The Fed is supposed to be apolitical. It isn't. Best, Don Bauder


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