Blame Greenspan

Brooksley BornPBS’ Frontline recently ran a story on the former head of the CFTC, Brooksley Born, and how she sounded an alarm about the then yet to happen meltdown in derivatives. Because her call for tighter reform flew in the face of Greenspan’s Ayn Rand-dominated philosophy of complete separation of markets and state, Greenspan and Clinton’s Treasury people shut her up and sidelined her comments.

This is why I say economics cannot ever become a belief system. It’s imperfect as it is and can’t be used as the basis for an ideological guide for policy. Actually, I’m not so thrilled with hidebound ideologies in politics. Those always lead to tears and suffering whenever the followers of an ideology try to bend reality to fit their view of the world.

Frontline has the episode online, and I strongly recommend you give it a view if you didn’t catch its broadcast. For my students, if you want some extra credit, watch it and write a little something about how Greenspan’s views contrasted with those of Keynesians. You might want to look at what happens in the stock markets when regulation in the USA is on the way out and what happens when regulation is in effect.

I know I don’t want to see government mucking about in my markets, but I have to face facts: some mucking about is necessary to keep criminals from ripping people off. There has to be a balance, though. If there’s too much government, the criminals do their ripping off in office instead of in boardrooms. Completely free markets result in horrors of humanity that markets might correct, but after much evil and unnecessary suffering.

14 thoughts on “Blame Greenspan

  1. Emily Sprunck

    Ok, I am a little confuse, are you saying that economics should not be used as a theory? I thought that was the point

  2. Nikkiah Guerra

    Brooksley Born…who is this woman to you? Is a non-existent person, a name you have never heard? To me Born tried to bring new life to our economy and prevent what is happening today. Her warning was rejected and shut down by ignorant male officials who wanted to prevent her from announcing the struggle our economy was about to face in a few short years. Now that President Obama’s administration (who were the same men who terminated Born’s positions) the current attempts to prevent worse factors from happening just made a bigger mess. Whoops! It looks as if they have made one mistake after another.

    Bush wasn’t at all moved my Born’s prediction; he believed the government funding and spending was just like a party. It wasn’t truly his money so he could do with it as he pleased. Let’s cut all taxes possible! Alan Greenspan and Chairman Deaddpan thought that a declining level of federal debt is desirable, well it looks like they got what they wanted.
    http://www.slate.com/id/99853/

    Today stocks are the worst market to be apart of, because there is no one investing and zero national debt being paid. Only six years ago the stock market was at it’s peak and bigger than ever, but that had to mean only one thing. BOOM! CRASH! BANG! It was going to fall! This is what Born tried telling everyone; sadly they were too busy partying it up with Bush and believing the good days would never fade away! For shame!
    http://www.theglobalguru.com/article.php?id=75&offer=guru001

    I believe that Brooksley Born should be awarded with a brand new house and vehicle of her choice, all expenses paid for, never have to pay for taxes…oh wait the economy can’t afford that! The American dollar is losing value by the hour! General Motors can’t offer her a new vehicle because they went bankrupt! HA! Go figure. While Born’s Warning should go awarded we can’t stop this crazy train from crashing into the largest brick wall ever of the economy ever. Yeah to Born to whom my hat is tipped for, but her warning can’t fix the present situation…unless time travel becomes possible!!!

  3. deanwebb Post author

    @Emily: Economics theories should not be used as religions or ideologies.

    @Nikkiah: Tighten up the prose and you could be a market commentator…

  4. Raphael Yohannes

    I plan to watch the video soon, but I have a question. Is it better to have no governmental control or full governmental control in the market? It seems to me like they both have there ups and downs..

  5. deanwebb Post author

    It is better to have neither, truth be told. But I know that’s not what you asked. You’ll just need to think about the answer for yourself.

  6. Ali Aenehzodaee

    Greenspan reluctantly admitting he was wrong was priceless.

    So was Greenspan really that stupid or did he have some basis to his con/libertarian economic ideas? I mean, he was referred to as a disciple of Ayn Rand, who coincidentally or otherwise believed in “ethical egoism” or the idea that those who have the means to should act only in their own best interest. This seems horribly backwards and its shocking that it has been permeating into American economic litigation and ideas on limited-government capitalism from Ford to Clinton and even today.

  7. Ali Aenehzodaee

    scratch that, people have always acted in their own best interest..

  8. Matthew Wong

    So economics is a bunch of opionions… if we had listened to Born, then we would of understood what would have happened before it happened. But what she said was a possibility. There are many opinions on how the economy should be run, but we cannot listen to all of them. What she said was just what could happen, but not a lot of people believed her because it contradicted what they had said. So economics in general is not stable? it is what it is?

  9. Hugo D Espiritu

    Basically that is all economists can do, speculate. I guess they can make a more educated guess with their understanding of how the market works but it is a guess nonetheless.

  10. Raphael Yohannes

    The video was depressing. I think Greenspan, Rubin, Summers, and the rest of the members who started this deal with derivatives should be shipped kicked out of the us. After watching the video I want to meet Born.

    –Mr. Webb, why was Rubin still kept in the committee after being apart of the melt down, How difficult is it to understand derivatives, and do you think they paid Born off to shut her up or was there more to it?

  11. deanwebb Post author

    Born just didn’t want to be unprofessional, that’s why she didn’t talk about certain things.

    As for why the guys in charge get to stay in charge… one word… connections.

  12. David Truong

    As our generation comes of age though, I think we are going to progress to voting for people who just feel right to us. I think as time passes, we are becoming less and less aware of currents events (probably because we don’t read up on them) and will just start to vote for people who we relate to instead of what their platform is. This will probably put some new people in charge. Is that good or bad? Only time will tell.

  13. Tais Altunian

    I can’t believe these men ignored everything Born believed in and was warning. Our economy has always been run by the hands of these so-called men with connections and they have been digging us into a deeper hole of trouble as time goes by. If they took the time to consider what Born was saying, we obviously would have been in a less complicated web of troubles.

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