Monday, September 24, 2007

Why believe Greenspan now? Full text

Why believe Greenspan now?

Comment is Free in the Guardian

It would almost be reassuring if the war had a rational cause like oil. But Bush was listening to God, not to the chairman of the Federal Reserve.
Ian Williams

September 22, 2007

Alan Greenspan has benefited considerably from the the US media's customary deference to any significant figure, such George Bush or General David Petraeus, "drest in little brief authority." At times, hagiography is the natural medium for mainstream pundits. And so it is for Saint, or rather Sir Alan, since his knighthood.

So I suppose it is not too surprising that so many jumped on his quote: "I am saddened that it is politically inconvenient to acknowledge what everyone knows: the Iraq war is largely about oil."

But this does not prove the case. All it proves is that Greenspan thinks so.

In fact, Greenspan has eaten his own words so often while and since he headed the Federal Reserve that it almost accounts for his impenetrably masticated prose. The one issue that comes clearly through his gnomic utterances is his monstrous ego. Like the fly in the La Fontaine fable who thought he moved the coach by buzzing around the horse's nuzzle, Greenspan has always taken the credit for all economic booms while skipping over his part in the busts. The Fed really only has one sure instrument, and that is the brake, in the form of raising interest rates. The accelerator, dropping rates, is a now and then thing, depending on many more factors.

Just consider Greenspan's history. He started off as the head of the fan club for Ayn Rand, the writer who combined the megalomaniac sweep of Mein Kampf with the bodice-ripping proclivities of Barbara Cartland. Her best example, Atlas Shrugged, is a hymn of hate to FDR and the New Deal that put America back to work after the Depression and laid the foundations for the unprecedented growth and prosperity of the 1950s and 1960s.

In the process of his infatuation, he became a "gold-bug," a believer in the mystic economic properties of the yellow metal and hard currency, a fighter against inflation.
His PhD was awarded by NYU on the basis of a collection of previously published articles, which he asked them to withhold from public view.

He never renounced his beliefs, despite his part in setting the stage for putting the US dollar on devaluing slide unprecedented since the Confederate dollars hit the printing presses. He set the stage for the dotcom bubble, and typically threw in a hedging warning about "irrational exuberance" - but then did nothing about it.

As he said in 1995: "I spend a substantial amount of my time endeavoring to fend off questions, and worry terribly that I might end up being too clear." Not to worry, with his customary prophetic ambiguity, he told congress that the budget deficit is a bad thing, but the tax cuts for the rich that precipitated it and are going to make it worse, are good and irreversible. Go extrapolate.

He has called for the privatization of social security, so American workers can entrust their financial futures to those wonderful people who brought you the dot-coms, back-dated stock options and sub-prime mortgage bonds. He considered that stock options by the billion for CEOs had no inflationary effect while a couple of dimes on the minimum wage would. Instead he told the Senate that his preference for the minimum wage "would be to lower it and, in fact, eliminate it because I think that it does more damage than good."

In the context of such manifest failure as a prophet, it would be credulous to give too much credence to his revelation that invading Iraq was about oil, part of America's war for global resources. It is more likely part of his plan for ensuring adequate resources for his retirement by hyping the sales of his book.

While the "realist" right will nod approvingly at what they consider to be pragmatic reality, too many on the left will seize on this as support for their "blood for oil" rhetoric. Both of them have to explain why there is less oil coming out of Iraq, at higher cost, than under the bad old days of Saddam. Of course his advice to Bush to invade for the oil would not be the first time that Greenspan had passed on disastrous advice, but sadly it would almost be reassuring if we could ascribe such rational if amoral motives to the invasion. There were certainly all, of motives and lobbies pushing in that direction. Supporters of Israel, some of the more naïve liberal interventionists from Tony Blair to Christopher Hitchens, neocons trying to remake the world in the American image, all buzzed around the nose of the carthorse of this bandwagon. But not the oil companies.

But we look to Bush for the sheer irrationality of it all: God told him to do it. Saddam tried to kill his Dad. And, by deduction, we have the Deserter-in-Chief trying to emulate his father, a teenage war hero, by covering his own cowardly tracks in a cloud of sand and a flood of blood. If George Bush junior is prepared to start a disastrous war on instructions from his own personal Jesus as well, it does make him daft enough to listen to Greenspan even if the Fed chair killed his father politically by tightening the economy to the edge of depression, and then reversing course in time for Clinton to take the credit.

War opponents would be better ignoring as mendacious a maven as Greenspan rather than using him to boost their rhetorical case.

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