This was the Master of the Universe. Our universe. He strutted his stuff as if he knew what he was doing. And yet…
In his self-serving memoirs, Greenspan claimed that the problem was with the theoretical models they used. He wrote: “The models never forecast recession, because the parameters are dominated by what happens in normal times when the economy is growing”.

What’s “normal”?

The tools used by Greenspan were useless. Like the weather forecasters, they told us the obvious – the sun’s shining (look through the window)…the economy’s growing (look at the flow of people through the shopping malls).

But now we are given a glimpse into the tortured mind of this soul. He is shocked by the collapse of the banks. His work-view is in pieces. “I made a mistake in presuming that the self-interest of organisations, specifically banks, is such that they were best capable of protecting shareholders and equity in the firms…I discovered a flaw in the model that I perceived is the critical functioning structure that defines how the world works”.

This is mea culpa with knobs on! And yet, he would only admit to “partial” blame. He was more interested in telling the US Congress about his state of mind: “Those of us who have looked to the self-interest of lending institutions to protect shareholders’ equity (myself especially) are in a state of shocked disbelief”.

Where’s the Apology Alan?

But bankers were looking after their interests. They ran riot over the money system because central bankers like Greenspan – the stewards of the public’s welfare – failed to discharge their responsibilities.

Greenspan may be suffering from shock. Many millions of others are suffering something far more substantial – losing their homes and jobs. And all this because one man – Alan Greenspan – clogged his mind with damaging doctrines that do not reflect the real world.

Wouldn’t it be uplifting if this man offered an apology without qualification? That would enable us to start living properly by embracing sensible economic policy. Any takers?

Prime Minister Gordon Brown says he will tell leaders of the rich nations, at a meeting next month, how to lay the foundations for a stable future. For the reasons I spelt out at the Foreign Press Association press conference (see youtube channel) - he will fail.
But what about his side-kick, Chancellor of the Exchequer Alistair Darling? He’s leading the Keynesian “pump-priming” rescue of the UK economy, promising to fund mega-projects to create jobs. Does he know what he’s doing?

A Taxing Challenge

I spelt out the fiscal policies for sustainable economics for Darling’s benefit, when he moved into the UK Treasury as Chief Secretary in 1997. The Treasury’s reply (dated November 2) said he was “making enquiries”. I never did hear the outcome of his investigation, but we can guess what happened: nothing. The rest is history.

Darling and his boss, Chancellor of the Exchequer Gordon Brown, set Britain on a course of boom/bust which will now blight the lives of 2m families: their chief asset – their homes – will be worth less than their mortgages by 2010.

Darling didn’t get his public finance policies right in the good times, when the economy was plain sailing for the Daring Duo. Don’t expect him to succeed now, as the economic tsunami batters Britain.

He threatens to deal with “irresponsible behaviour” in the City of London. This, from the man who was repeatedly warned (by me) over the past 10 years, that he was leading the country into an economic bust that would be as ferocious as the 1930s.

As Chancellor of the Exchequer, he repeatedly assured the nation that there would be “no return to housing boom/busts”. But what did we get? The worst bout of land speculation (because that’s what it really was) in postwar history.

And yet, in 1997, I submitted to him the evidence of what it would take to stall the next housing cycle. He studiously ignored the advice, preferring to ride off into the sunset on his brand of Quixotic economics.

Promises, Promises, Promises

Now we are expected to believe him when he says “I’ve said for some time that we need reforms in the system”. And: “We’ve got to clean up the financial system, we don’t want these problems recurring in the future.”

But the future is precisely what he cannot foresee – or forestall. He’ll go down in history as the Chancellor who chanced his luck – and our homes – on the poker table of conventional economic wisdom.

He’s blaming foreigners, of course. “I proposed a number of things to our international colleagues because this is global action that is needed to deal with a global problem, and in our own country we’ll do whatever is necessary to make sure that people have confidence both in the system and we restore the prosperity of the country.”

Instead of worrying about people’s confidence in “the system”, Brown should reflect hard about whether people have confidence in him.