Jan 31, 2008

October 6, 2007: Greenspun, Let the CHIPs Fall Where They May, The Maiden With Wrought Iron Soul

Former Federal Reserve Board Chairman Alan Greenspan has been making his rounds on the talk circuit doing to his new book, The Age of Turbulence: Adventures in a New World, what Republicans are so good at doing to the historical record: smearing it. Backing off his statement that the war in Iraq has always been about oil, the former oracle of Wall Street offered up more of his usual bromides in the form of a clarification to the effect that he really didn’t mean anything like that at all.

Greenspan is very good at twisting the language into a form of pretzel-logic that in the end becomes so convoluted and esoteric as to be properly understood by only Greenspan himself. He has made a career of sewing confusion forcing the money managers to read his tea leaves in order to divine their immediate economic prospects. A whole industry has sprung up charged with interpreting precisely what the good Chairman meant when he was interviewed on television or appeared before a congressional committee and stocks would gyrate wildly in reaction. It is easier to interpret the Revelations of Saint John the Divine than to understand the utterances of the Chairman, for he has become the resolute master of the vague and obtuse; a veritable Nostradamus of finance.

Greenspan avoids the simple declarative sentence like a rabid dog avoids water—and for good reason. To render the obvious obvious can not only be dangerous—it can bring this financial house of cards crashing down—it can also lose one friends in high places. Besides one gets the impression, from watching his career, that perhaps he didn’t really have all that much to say and when the situation demanded it he didn’t have the courage to speak.

There are solid reasons why Alan works so assiduously to burnish his record. Few remember, and Alan does not care to remind us, his debut on the national stage. Brought to Washington by Nixon, he was appointed chief economics advisor to President Ford charged with doing something to reign in the runaway inflation that had plagued the country during the Nixon years. His response to the challenge was pure Aynn Rand. Simply give the public a platitude in the form of a lapel button with the word “WIN” printed on it, for “Whip Inflation Now”. So induced the public, acting as a rational actor in the marketplace, would respond appropriately and the hyperinflation of the decade would simply disappear. Riotous laughter broke out across the country and people asked “is this a presidential advisor or merely a court jester?” Greenspan slinked back behind the curtains and was not seen again for several years.

The public humiliation of Greenspan burned a deep scar on his psyche, for in its aftermath poor Alan saw inflation lurking behind every bush, under every bed. Later when he re-emerged as chairman of the Federal Reserve Board he made it his mission in life to wage relentless war against the inflation boogeyman, real or imagined. So every time the middle class was about to finally cash in on the Reagan prosperity of the 80’s and the Clinton boom of the 90’s there would stand Greenspan and the Federal Reserve shouting about the inflation boogeyman, raising interest rates and driving up the cost of money and unemployment. When no one else in the universe saw inflationary pressures in the late 90’s Alan, once again trembling before the boogeyman, raised interest rates nine times in the year 2000. This simultaneously created a minor recession and laid the groundwork for the return of the Bush family to the presidency; so obsessed was he with never again suffering such public humiliation. No one chose to point out to the Chairman when he appeared before congress that perhaps the greatest inflationary pressure was the Federal Reserve itself, driving up the cost of money.

Then there were the sins of omission. He spoke obliquely of the “irrational exuberance” of Wall Street leading up to the dot.com crash but did nothing to advocate reining it in. The result was a financial meltdown. Ignoring solid data that for years we have been building 25% more housing units per year than the market needs—almost all of it on speculation—he chose to sit idly by and let the market run wild leading to the present real estate bubble that the country is only now beginning to grapple with.

His new book makes much of how the good Chairman thinks that Bush has led the country astray, taxing work instead of wealth and deploring the runaway trade and fiscal deficits. But you will search the historical record in vain to find a single critical word spoken in public by the nation’s chief economic guru when Bush set about derailing the Clinton Express. No instead there was Alan before the congress in 2001 with his usual “Greenspaneeze” bobbing and weaving and giving his tacit approval as Bush ran the country from record surpluses to record deficits in record time. Such are the sins of Alan Greenspan which he seeks now to sponge clean with his new fiction, this assault on the historical record, this pious fraud.

For years Greenspan was the center of attention. He had Wall Street snorting his every fart, as if real wealth were created in divining the oracle instead of manufacturing goods on the shop room floor. He presided over the integration of America into the global economy; over the gutting of the American industrial base, the impoverishment of the middle class, the outsourcing of wages and capital; over the transformation of the U.S. economy from manufacturing to finance. To him “traumatized workers” created by a “heightened sense of job insecurity” was something to be celebrated (Alexander Cockburn, Nation Oct. 8, 2007) because it kept inflation under control. Greenspan and the Federal Reserve stand as an historical monument as to why one does not put bankers in charge of the economy, and why one does not privatize the money supply, for such men can only be relied upon to lead us now into the nineteenth century.

“Now listen to this, and I’ll tell you ‘bout the Texas
I’ll tell you about the Texas Radio
I’ll tell you about the hopeless night
Wandering the western dream
“Tell you about the maiden with wrought iron soul”—The Doors.

“Compassionate Conservatism” has once again been sacrificed to the ideological imperative. It was never anything more than another catchphrase, a campaign artifice designed to lure the soccer mom into a comfort zone before the Neo-Cons hijack her and her minivan and take her out in the woods for the inevitable rape. This time the assault comes in the form of a veto of the S-CHIP program, the State Children’s Health Insurance Program. Passed with rare bi-partisan support during the Clinton years the ten year old program has reduced the number of uninsured kids by 1/3. But with nearly 9 million children currently without medical insurance the Democratically led congress voted to increase coverage with the House version adding nearly 5 million kids to the roles and the Senate version 4 million (see the Nation Oct. 8, 2007 pg. 7). The congress came up with a compromise satisfying even Senator Orin Hatch (R-Utah) but the White House decided that it covered too many kids and, more importantly, would lead down the slippery-slope to socialized medicine. This from a President who hadn’t vetoed a single spending bill until the Democrats gained control of congress!

“Some call it heavenly in its brilliance
Others, mean and rueful of the Western Dream”….The Doors

Harry Reid (D-Nev) called the veto “heartless”, Hatch was beside himself knowing that many a Republican governor will be hard-pressed to find the funds to keep these state programs afloat. Some Republicans, it appears, are beginning to understand that ideology can be a cruel and self-absorbed lover; a maiden with wrought iron soul.

For eight long years we have wandered the Western Dream, searching for the promise of the new century.

“I’ll tell you this
No eternal reward
Will forgive us now
For wasting the dawn” –The Doors.

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