321 Gold - Bill Bonner
04-14-2010
Poor ol' Alan...
We almost felt sorry for him.
"Maestro mauled... " said the headline in The Financial Times. We wanted to maul him many times. But now that others were doing it... it made us feel sympathetic to the old scalawag.
Didn't the Alan Greenspan Fed's failure to curb subprime lending deserve to go into the 'oops' category, demanded chief tormentor Phil Angelides.
Mr. Greenspan defended his legacy. He was right 70% of the time, he said. The other 30% of the time he was wrong.
Hey, that's not bad. Pity it's not true. Greenspan was wrong 90% of the time - at least.
He thought those fancy derivatives actually spread the risk of failure... and made the system more stable.
He thought those subprime loans helped people of modest incomes realize the goal of home ownership.
He saw no risk in keeping the key rate at an 'emergency' low level... years after the emergency had passed.
But he hit one of those magic moments last week... when he was finally right about something. He declared that the yield on the 10-year note was "the canary in the coal mine." This week, the canary wobbled... but stayed on his feet. He's still standing... but looking a little peaked. More below.
While the former Fed chief was in the spotlight at The Financial Times yesterday, the present Fed chief was front-page news over at The Washington Post. Alan Greenspan is a scoundrel, no doubt about that. But he was, in some ways, a better Fed chief than Bernanke.
The trouble with Bernanke is that he doesn't know his limitations. He actually believes the Fed can look at the possible outcomes going forward and improve them before they come out.
"Fed chief sounds a deficit warning," is the headline. He said Americans faced a "difficult choice." It's between higher taxes and fewer entitlement services, he said.
This doesn't seem like a difficult choice to us. We'd gladly accept fewer "services" from the feds if they'd lay off on the taxes. But that's because we're in the half of the US households that actually pays taxes.
No kidding; the report was in yesterday's news:
"Almost one half of US households pay no federal income tax."
So, welcome to the beginning of the end. If half the citizens get bread and circuses without paying for them, you can bet that the whole shebang is headed for destruction. The math doesn't work. Half the people have no interest in curbing taxes or spending. Obviously, those people would prefer to raise taxes - on us - rather than give up their free pills and retirement benefits. Even among the half that does pay taxes, most pay very little - less than they get back in 'services.'
Full article HERE
