Sunday, August 13, 2006

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Popping the bubble

I have a review of Peter Hartcher's Bubble Man: Alan Greenspan and the Missing $7 Trillion in today's Washington Post. The opening and closing:

The subtitle of Bubble Man symbolizes the many flaws in Peter Hartcher's jeremiad against Alan Greenspan and the dot-com hysteria that the former Federal Reserve chairman allegedly abetted. The "Missing 7 Trillion Dollars" refers to the losses that stockholders incurred in the three years after the late-1990s stock market bubble collapsed. Throughout the book, Hartcher argues that Greenspan is to blame for those losses -- until the epilogue, in which Hartcher acknowledges that in the three years after those three years, a market upswing recovered "nine dollars out of every ten lost." As Gilda Radner's Emily Litella famously put it, "Never mind."....

By the end of the book, Hartcher seems determined to throw as much mud at Greenspan as possible. Some of this is amusing (Greenspan was a recipient of the Enron Award for Public Service), but most of the time he overreaches. After all, blaming Greenspan for all day traders is like blaming Bill Clinton for all adulterers.

A central irony of Bubble Man is that it is Greenspan's aura as the master of markets that gives Hartcher's accusations any resonance at all. Greenspan was so adroit at handling so many aspects of his job that it seems plausible that he should have handled the dot-com hysteria as well. Greenspan is not perfect, but he's no bubble man.

It was difficult, in the space alloted, to list all the reasons I thought this book sucked eggs. For those who really care, do check out Steven Mufson's lengthier critique in The Washington Monthly.

posted by Dan on 08.13.06 at 09:06 AM


"Despite Greenspan's speeches about the "frothiness" of the housing market and the Fed's repeated increases of short-term interest rates, the Fed has had a minimal impact on both housing prices and long-term interest rates."

I think lowering the short term rate to 1% probably had something to do with the last stages of the RE bubble. And I don't think Hartcher represents a crank minority opinion.

posted by: bjk on 08.13.06 at 09:06 AM [permalink]

No doubt that Greenspan is a very capable man, but I agree with bjk: in a few years when the US has a clear inflation problem, it will be able to be traced back to the Greenspan years whereby he deferred taking pain in the present for much more pain in the future.

posted by: St. James the Lesser on 08.13.06 at 09:06 AM [permalink]

I also had occasion to review Bubble Man and reached similar conclusions:

posted by: Stephen Kirchner on 08.13.06 at 09:06 AM [permalink]

I am not at all a fan of Greenspan. But I was very disappointed with the book. A lot of froth and air, and what appeared to be a very shallow understanding of the subject.

To the extent he is remembered at all, I doubt history will be kind to Greenspan.

posted by: russell on 08.13.06 at 09:06 AM [permalink]

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