Alan Greenspan has been hawking his book lately. The more I hear him, the more I’m convinced he doesn’t know what he’s talking about and never did. His doublespeak constantly reminds me of 1984. With that in mind, maybe his goal is to confuse people into inaction.
“We are beginning to get not stagflation, but the early symptoms of it,” Greenspan said.
So he’s saying is we’re seeing the early signs of stagnant inflation (stagflation) in the economy.
In an interview on ABC’s “This Week with George Stephanopoulos,” Greenspan said low inflation was a major contributor to economic growth and prices must be held in check.”We are beginning to get not stagflation, but the early symptoms of it,” Greenspan said.
“Fundamentally, inflation must be suppressed,” he added. “It’s critically important that the Federal Reserve is allowed politically to do what it has to do to suppress the inflation rates that I see emerging, not immediately, but clearly over the intermediate and longer-term period.”
I think Greenspan shares a lot of the blame for this inflationary spike and impending stagflation, if it occurs. He led the Fed down a interest rate cutting path that created the cheap money high that resulted in the housing bubble as a knee-jerk reaction to a soft recession in the economy after the dot-com bloodbath/implosion and the 9/11/2001 terrorist attacks. Economies operate in cycles with highs and lows. The recession we had was a natural part of that cycle. Instead of letting the recession play out, the Fed intervened by slashing interest rates to almost nothing. Instead of giving time between each rate cut to see if the previous rate cut was working, the Fed kept slashing. That kept the U.S. economy out of recession but it created unsustainable inflation in the housing market, and it likely made this next recession a bloodier mess. It makes me think that the Fed was operating with the short-term vision Wall Street is famous for pushing on public companies. In contrast, the Fed needs to keep the long-term health of the economy in mind, even if it might hurt a little before then.
Speaking of the Fed, Congress needs to do its job to provide some oversight over the Fed to make sure it isn’t pandering to a particular lobby and isn’t cooking the books. It is after all a quasi-government organization that has been assigned the task of a central bank. Oh wait, Congress already panders to a particular lobby (the one with fistfuls of dollars, euros, and pounds) and doesn’t bother to keep the books. Nevermind.
Time to turn off the Greenspan double-speak machine and ignore anything it says.