The economy is not an Ayn Rand novel

We were up all night at my house working on the school newspaper. It was my house because I was the only person in the entire high school who had a copy of Pagemaker and a laser printer.

The other editors started to complain about which things would be caught by our faculty advisor this time and we would be forced to change. One of them started calling her the “Fat Raging Bovine” or FRB for short. At that moment, I had a gap in the layout that no amount of finagling could cause me to get rid of. I filled the tiny space in with a line drawing of a bull overlaid with the text “FRB” crossed out.

We laughed, and moved onto the next page.

I never did get around to removing it.

The next day, when she was reviewing the layouts, she asked what that graphic was for.

Uhhhh… “It’s a protest because that new Alan Greenspan, the new chairman of the Federal Reserve Board (FRB), changed the prime interest rate,” I extemporized. “Think of it as a graphical editorial or editorial cartoon.”

“I don’t know. I don’t think the students will get it.” She paused. “Okay, I guess we can let it through.”

Slinging the bull—not one of my prouder moments.

“Maestro.” My. Ass

Fast forward almost two decades…

Today I read that the aforementioned person and Ayn Rand disciple was called before Congress to explain the mess that everyone has seen coming since 2003:

Appearing before the House Committee on Oversight and Government Reform, the man once dubbed “The Maestro” said he had found a flaw in the “critical functioning structure that defines how the world works”. “I don’t know how significant or permanent it is but I have been very distressed by that fact,” Mr Greenspan said.

“I made a mistake in presuming that the self-interests of organizations, specifically banks and others, were such that they were best capable of protecting their own shareholders and their equity in the firms.”

Asked by committee chairman Henry Waxman if he was saying his world view was “not working”, Mr Greenspan said: “Absolutely, precisely. You know, that’s precisely the reason I was shocked, because I have been going for 40 years or more with very considerable evidence that it was working exceptionally well.”
—“’I made a mistake’ admits Alan Greenspan” The Wall Street Journal, October 25, 2008

On reading that I had to laugh. A “flaw”? A “flaw”? The only “flaw” here is that it took 80 years for the someone to gain the common sense of a ten year old. Read the above again. If it wasn’t so disastrous it’d be positively humorous.

I’m now glad that I did that graphical editorial in my high school newspaper, all those years ago.

My small delusion caused some personal regret; his tanked the the world’s largest economy.

Alan Greenspan: he brings a new perspective to the phrase: “Economy Stupid.”

5 thoughts on “The economy is not an Ayn Rand novel

  1. The history of Fed chairman seems to contain a number of principled economists raising money supply under political pressure. (eg Arthur Burns vs. Nixon)

    My favorite Fed chairman is Paul Volcker, Jimmy Carter’s greatest success. Volcker resisted stupid politicians and starved the system of money supply. It was messy, but inflation was killed in a big way. Volcker just implemented the ideas of Burns and Greenspan.

    Greenspan did a good job of following up on Volcker’s success. He agreed to loosen money supply for Clinton in return for higher taxes and lower deficits.

    I loved Greenspan’s comments. He always wants to be in the news. He had little to do with the mess we’re in, even if he claimed he made it. I think he’s culpable to the extent that 10:1 was a good leverage ratio for banks making home loans, but he did not stop banks and funds from leveraging 30:1. If he had increased capital requirements on the securities as well, the housing bubble would have fizzled. I think the fix is easy. Just go back to 10:1 and follow the money until everyone is forced to follow the rules.

    That’s just part of it. The real real reason we’re in this mess is lending money to poor people. You might have noticed that poor people don’t have any money. The goal of 75% home ownership is too much. Maybe 65% can actually manage their finances well enough to own a home.

  2. Well little to do as part of the fed, but a lot to do as he was advising government not to seek regulation for things like sub-prime mortgages and derivatives based on them (for instance).

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