We were listening to Alan Greenspan, former Federal Reserve Chairman, holding forth — with a lucidity we had never heard until now — on his new tome, "The Age of Turbulence — And How I Caused Most of It," Having heard the man many, many — far too many — times in the past decade, we could hardly believe it was the same person. Had we simply passed out during the course of the Great Bubble Era and was the Alan etched in our memory so vividly merely a bad dream? An apparition from a parallel universe?
Or was it the Great Moderator himself?
Fortunately our fears that we were losing our mind were set to rest. We received a missive from the real Alan Greenspan, shortly thereafter, telling us that the Greenspeak we had gotten used to all these years was simply camouflage. The real Greenspan, it said, was the man now before us, confessing from his…er…debt-bed that he had never meant to lower interest rates — never ever. Perish the thought.
But, why speak for him? Here is the Maestro in his own words:
"I, Alan Aurifericus Nefarious Greenspan, Chairman of the Federal Reserve Bank, holder of the Medal of Freedom, Knight of the British Empire, member of the French Legion of Honor, known to my peers as the "greatest central banker who ever lived"…
…I will not trouble you with all my titles, I will not mention, for example, that I was the winner of the prestigious Enron Prize for distinguished public service, awarded on November 1, 2001, just days after Enron began to collapse in a heap of corruption charges…. am about to give you the strange history of my later life.
For I will dispense with childhood…even with young adulthood, and those dreary sessions with that very dreary woman, Ayn Rand, who couldn’t write a compelling sentence if her life depended on it….and my own dreary years at the Council of Economic Advisors…and pass directly to the time I spent as the most powerful man in the world. For here are my real titles: Emperor of the world’s most powerful money. Ruler of the world’s largest and most dynamic economy. And Architect of the most audacious financial system this sorry globe has ever seen.
Yes, I Alan Greenspan, ruled the financial world. But who ruled Alan Greenspan? Ah…I will come to that…and tell you how, while presiding over the biggest boom ever I became caught in what I may call the "golden predicament" from which I have never since become disentangled.
This is not by any means the first thing I have written. I have written much over the years. But it was all written for a purpose which only a few were able to discern. Most readers foolishly saw the cluttered mind of a dithering economist, or the clumsy, stuttering pen of a professional bureaucrat. Many listening to my wandering speeches and twisting sentences thought that English was not my first language. They thought they detected a faint accent, like Henry Kissinger or Michael Caine. They mocked me as "incomprehensible" or "indecipherable." They watched what they thought was an obsequious public servant squirm. They had no idea what I was really up to, which only now can I reveal.
But they admired me too. I knew it. Because they thought they saw in me a kind of genius…an Einstein of economics, whose mind worked at such a high pitch his thoughts sound inaudible to most humans. They counted on me to keep the great empire’s economy rolling forward. Little, actually nothing, did they know of my real thoughts and designs.
But now, all has changed. Now I can write clearly and speak the truth. For now I have left my post. There is no further need for me to dissemble. No further need for me to seem to kow-tow before Congressional committees. No further need to hide the real facts from my employers and the American people. Now, I swear by the gods, what I write comes from my own hand, and not from some highly-paid anonymous flack.
Some are born in crisis, some create crisis, and others just make a mess of things.
Let me begin at the beginning. Scarcely had I settled into the big chair at the Fed when a crisis was thrust upon me. And it is true, I responded in the conventional manner. There is no manual for central bankers. But there is a code of behavior. Faced with a financial crisis of any sort, a central banker’s first duty is to run to the monetary valves and open them. This I did in 1987. I was new to the job and probably didn’t open them enough. The U.S. economy lagged its rivals in Europe for several years. My old boss, George Bush, the elder, lost his bid for re-election in 1992 and blamed it on me. I resolved never to make that mistake again. Faced with a slew of challenges, shocks, uncertainties, crises and elections…ever thereafter, I made sure that every valve, throttle, level, switch and sluice gate was wide open.
But it was on December 5, 1996 that I had my first epiphany. That was the year that I made my celebrated remark about stock prices. I wondered if they did not reflect a kind of "irrational exuberance." Whether they did or did not, I do not know. But what I came to realize was two things: 1) People, especially my employers, actually wanted prices that were irrationally exuberant. And 2) they could become far more irrationally exuberant if we put our minds to it.
I was 70 years old at the time. I had weaseled my way (why not be honest about it?) to the top post by knowing the right people and by making myself generally agreeable, and helpful, and by not saying anything anyone could disagree with. That was the original reason for what the press referred to as "Greenspan speak." My private thoughts remained mine alone. All the public and the politicians got was gobbledygook, but for good reason.
They would not have wanted to hear what I really thought. So I did not tell them. For I knew well and good what generally happened when politicians and central bankers got their hands on soft money and a compliant central banker. I was not born yesterday. They use their control of the money to cheat people. It is as simple as that. (I explained this early in my career; fortunately, no one bothered to read it.)
“An almost hysterical antagonism toward the gold standard is one issue which unites statists of all persuasions,” wrote I, when I was still expressing myself in the Libertarian rag. The Objectivist, in 1966, continued: “They seem to sense — perhaps more clearly and subtly than many consistent defenders of laissez-faire — that gold and economic freedom are inseparable, that the gold standard is an instrument of laissez-faire and that each implies and requires the other.”
“Gold and Economic Freedom” was my topic in ’66.
“In order to understand the source of their antagonism, it is necessary first to understand the specific role of gold in a free society,” I went on.
“Money is the common denominator of all economic transactions. It is that commodity which serves as a medium of exchange, is universally acceptable to all participants in an exchange economy as payment for their goods or services, and can, therefore, be used as a standard of market value and as a store of value, i.e., as a means of saving.
“If men had no means to store value, i.e., to save, neither long-range planning nor exchange would be possible.”
Then, after a long discussion of how money works, I gave the Objectivists the conclusion they wanted to hear and one in which I believed strongly myself then, and still do:
“In the absence of the gold standard, there is no way to protect savings from confiscation through inflation…. The financial policy of the welfare state requires that there be no way for the owners of wealth to protect themselves.
“Deficit spending is simply a scheme for the confiscation of wealth. Gold stands in the way of this insidious process. It stands as a protector of property rights. If one grasps this, one has no difficulty in understanding the statists’ antagonism toward the gold standard.”
I do not quote myself at such length to quarrel with me. Au contraire, we have never changed our opinion. But 10 years later, in 1974, I left New York for Washington. That is, I left America’s heart of commerce to take up residence in its gall bladder of politics.
I was no fool. That was where the real power & glory were. Of course, I had to abandon the free-market, gold-standard currents of the East River for the malignant political eddies and festering statist swamps of the Potomac.
I left New York to serve as the chairman of President Ford’s Council of Economic Advisers. Ayn Rand told a reporter that I was "her (?) man in Washington." I had to laugh. She expected me to change Washington, which just goes to show how lost in space she was. I never even tried to change Washington; I only tried to use it…."
Read the rest of Greenspan’s real memoir in Mobs, Messiahs, and Markets, William Bonner and Lila Rajiva (Wiley, 2007).
Bill Bonner [send him mail] is the author, with Addison Wiggin, of Financial Reckoning Day: Surviving the Soft Depression of The 21st Century and Empire of Debt: The Rise Of An Epic Financial Crisis. Lila Rajiva [send her mail] is the author of the ground-breaking study, The Language of Empire: Abu Ghraib and the American Media (MR Press, 2005), and the co-author with Bill Bonner of Mobs, Messiahs and Markets (Wiley, 2007). Visit her blog.