portland independent media center  
images audio video
newswire article commentary united states

economic justice | government | social services

Greenspan: Why is Anyone Still Listening to This Partisan Hack?

He's a schill for the President, collects full Social Security benefits and a $200,000 salary, stands to collect another $100,000 a year in federal retirement benefits, and he wants to cut your Social Security benefits! Why should anyone listen to a guy with his lousy trackrecord as an economic and stockmarket forecaster anyway?

Any Democrat who still offers praise for Alan Greenspan after his latest propaganda supporting the Bush attack on Social Security should be dumped by the party and voters alike.

Greenspan has always been a Republican agent at the Federal Reserve, even in the Clinton years, but his support for private Social Security funds, and his latest warning that cuts in benefits for retirees need to be considered are both scientifically unjustified and unsupported, and politically craven, especially coming from a man who himself is already collecting the maximum Social Security benefit and who stands to walk away with a $100,000/year federal pension on top of that when he finally retires as Reserve Board chairman.

Democrats in Congress have largely gone along with the charade that the reserve board chairman is above politics and that his deliberately chimerical statements on interest rates and fiscal and monetary policy are received wisdom.

In fact, Greenspan contributed mightily to the collapse of the stock market following the popping of the Internet bubble, by failing to act to limit stock speculation in the mid and late 1990s--something he could have easily done without even touching interest rates, by simply increasing margin requirements on investors.

His pronouncements on the financial stability of the Social Security system are no more prescient or sound than his economic forecasting skills, which have been repeatedly found wanting.

It is probably worth remembering that when Greenspan left his private career as owner of a pension management firm, Townsend Greenspan, and went into government service, he left a company run into the ground because of his poor investment advice and market forecasting abilities. By the time he left, Townsend Greenspan had lost all its clients, who had all sought more capable advisers with better records.

American workers should remember all this when they read news reports quoting Greenspan as saying that the Social Security system cannot be expected to pay promised benefits to future retirees.

For other articles by Dave Lindorff, please go (at no charge) to This Can't Be Happening! .

homepage: homepage: http://www.thiscantbehappening.net

funny how 03.Mar.2005 10:23

2nd-op

Greenspan has gone from a gold-standard advocate to bubble boy. Read all about what he said in 1967:

Gold and Economic Freedom
by Alan Greenspan

An almost hysterical antagonism toward the gold standard is one issue which unites statists of all persuasions. They seem to sense-perhaps more clearly and subtly than many consistent defenders of laissez-faire-that gold and economic freedom are inseparable, that the gold standard is an instrument of laissez-faire and that each implies and requires the other.

In order to understand the source of their antagonism, it is necessary first to understand the specific role of gold in a free society.

Money is the common denominator of all economic transactions. It is that commodity which serves as a medium of exchange, is universally acceptable to all participants in an exchange economy as payment for their goods or services, and can, therefore, be used as a standard of market value and as a store of value, i.e., as a means of saving.

The existence of such a commodity is a precondition of a division of labor economy. If men did not have some commodity of objective value which was generally acceptable as money, they would have to resort to primitive barter or be forced to live on self-sufficient farms and forgo the inestimable advantages of specialization. If men had no means to store value, i.e., to save, neither long-range planning nor exchange would be possible.

What medium of exchange will be acceptable to all participants in an economy is not determined arbitrarily. First, the medium of exchange should be durable. In a primitive society of meager wealth, wheat might be sufficiently durable to serve as a medium, since all exchanges would occur only during and immediately after the harvest, leaving no value-surplus to store. But where store-of-value considerations are important, as they are in richer, more civilized societies, the medium of exchange must be a durable commodity, usually a metal. A metal is generally chosen because it is homogeneous and divisible: every unit is the same as every other and it can be blended or formed in any quantity. Precious jewels, for example, are neither homogeneous nor divisible.

More important, the commodity chosen as a medium must be a luxury. Human desires for luxuries are unlimited and, therefore, luxury goods are always in demand and will always be acceptable. Wheat is a luxury in underfed civilizations, but not in a prosperous society. Cigarettes ordinarily would not serve as money, but they did in post-World War II Europe where they were considered a luxury. The term "luxury good" implies scarcity and high unit value. Having a high unit value, such a good is easily portable; for instance, an ounce of gold is worth a half-ton of pig iron.

In the early stages of a developing money economy, several media of exchange might be used, since a wide variety of commodities would fulfill the foregoing conditions. However, one of the commodities will gradually displace all others, by being more widely acceptable. Preferences on what to hold as a store of value, will shift to the most widely acceptable commodity, which, in turn, will make it still more acceptable. The shift is progressive until that commodity becomes the sole medium of exchange. The use of a single medium is highly advantageous for the same reasons that a money economy is superior to a barter economy: it makes exchanges possible on an incalculably wider scale.

Whether the single medium is gold, silver, sea shells, cattle, or tobacco is optional, depending on the context and development of a given economy. In fact, all have been employed, at various times, as media of exchange. Even in the present century, two major commodities, gold and silver, have been used as international media of exchange, with gold becoming the predominant one. Gold, having both artistic and functional uses and being relatively scarce, has always been considered a luxury good. It is durable, portable, homogeneous, divisible, and, therefore, has significant advantages over all other media of exchange. Since the beginning of Would War I, it has been virtually the sole international standard of exchange.

If all goods and services were to be paid for in gold, large payments would be difficult to execute, and this would tend to limit the extent of a society's division of labor and specialization. Thus a logical extension of the creation of a medium of exchange, is the development of a banking system and credit instruments (bank notes and deposits) which act as a substitute for, but are convertible into, gold.

A free banking system based on gold is able to extend credit and thus to create bank notes (currency) and deposits, according to the production requirements of the economy. Individual owners of gold are induced, by payments of interest, to deposit their gold in a bank (against which they can draw checks). But since it is rarely the case that all depositors want to withdraw all their gold at the same time, banker need keep only a fraction of his total deposits in gold as reserves. This enables the banker to loan out more than the amount of his gold deposits (which means that he holds claims to gold rather than gold as security for his deposits). But the amount of loans which he can afford to make is not arbitrary: he has to gauge it in relation to his reserves and to the status of his investments.

When banks loan money to finance productive and profitable endeavors, the loans are paid off rapidly and bank credit continues to be generally available. But when the business ventures financed by bank credit are less profitable and slow to pay off, bankers soon find that their loans outstanding are excessive relative to their gold reserves, and they begin to curtail new lending, usually by charging higher interest rates. This tends to restrict the financing of new ventures and requires the existing borrowers to improve their profitability before they can obtain credit for further expansion. Thus, under the gold standard, a free banking system stands as the protector of an economy's stability and balanced growth.

When gold is accepted as the medium of exchange by most or all nations, an unhampered free international gold standard serves to foster a world-wide division of labor and the broadest international trade. Even though the units of exchange (the dollar, the pound, the franc, etc.) differ from country to country, when all are defined in terms of gold the economies of the different countries act as one--so long as there are no restraints on trade or on the movement of capital. Credit, interest rates, and prices tend to follow similar patterns in all countries. For example, if banks in one country extend credit too liberally, interest rates in that country will tend to fall, inducing depositors to shift their gold to higher-interest paying banks in other countries. This will immediately cause a shortage of bank reserves in the "easy money" country, inducing tighter credit standards and a return to competitively higher interest rates again.

A fully free banking system and fully consistent gold standard have not as yet been achieved. But prior to World War I, the banking system in the United States (and in most of the world) was based on gold, and even though governments intervened occasionally, banking was more free than controlled. Periodically, as a result of overly rapid credit expansion, banks became loaned up to the limit of their gold reserves, interest rates rose sharply, new credit was cut off, and the economy went into a sharp, but short-lived recession. (Compared with the depressions of 1920 and 1932, the pre-World War I business declines were mild indeed.) It was limited gold reserves that stopped the unbalanced expansions of business activity, before they could develop into the post- World War I type of disaster. The readjustment periods were short and the economies quickly reestablished a sound basis to resume expansion.

But the process of cure was misdiagnosed as the disease: if shortage of bank reserves was causing a business decline- argued economic interventionists-why not find a way of supplying increased reserves to the banks so they never need be short! If banks can continue to loan money indefinitely--it was claimed--there need never be any slumps in business. And so the Federal Reserve System was organized in 1913. It consisted of twelve regional Federal Reserve banks nominally owned by private bankers, but in fact government sponsored, controlled, and supported. Credit extended by these banks is in practice (though not legally) backed by the taxing power of the federal government. Technically, we remained on the gold standard; individuals were still free to own gold, and gold continued to be used as bank reserves. But now, in addition to gold, credit extended by the Federal Reserve banks (paper reserves) could serve as legal tender to pay depositors.

When business in the United States underwent a mild contraction in 1927, the Federal Reserve created more paper reserves in the hope of forestalling any possible bank reserve shortage. More disastrous, however, was the Federal Reserve's attempt to assist Great Britain who had been losing gold to us because the Bank of England refused to allow interest rates to rise when market forces dictated (it was politically unpalatable). The reasoning of the authorities involved was as follows: if the Federal Reserve pumped excessive paper reserves into American banks, interest rates in the United States would fall to a level comparable with those in Great Britain; this would act to stop Britain's gold loss and avoid the political embarrassment of having to raise interest rates.

The "Fed" succeeded: it stopped the gold loss, but it nearly destroyed the economies of the world, in the process. The excess credit which the Fed pumped into the economy spilled over into the stock market-triggering a fantastic speculative boom. Belatedly, Federal Reserve officials attempted to sop up the excess reserves and finally succeeded in braking the boom. But it was too late: by 1929 the speculative imbalances had become so overwhelming that the attempt precipitated a sharp retrenching and a consequent demoralizing of business confidence. As a result, the American economy collapsed. Great Britain fared even worse, and rather than absorb the full consequences of her previous folly, she abandoned the gold standard completely in 1931, tearing asunder what remained of the fabric of confidence and inducing a world-wide series of bank failures. The world economies plunged into the Great Depression of the 1930's.

With a logic reminiscent of a generation earlier, statists argued that the gold standard was largely to blame for the credit debacle which led to the Great Depression. If the gold standard had not existed, they argued, Britain's abandonment of gold payments in 1931 would not have caused the failure of banks all over the world. (The irony was that since 1913, we had been, not on a gold standard, but on what may be termed "a mixed gold standard"; yet it is gold that took the blame.)

But the opposition to the gold standard in any form-from a growing number of welfare-state advocates-was prompted by a much subtler insight: the realization that the gold standard is incompatible with chronic deficit spending (the hallmark of the welfare state). Stripped of its academic jargon, the welfare state is nothing more than a mechanism by which governments confiscate the wealth of the productive members of a society to support a wide variety of welfare schemes. A substantial part of the confiscation is effected by taxation. But the welfare statists were quick to recognize that if they wished to retain political power, the amount of taxation had to be limited and they had to resort to programs of massive deficit spending, i.e., they had to borrow money, by issuing government bonds, to finance welfare expenditures on a large scale.

Under a gold standard, the amount of credit that an economy can support is determined by the economy's tangible assets, since every credit instrument is ultimately a claim on some tangible asset. But government bonds are not backed by tangible wealth, only by the government's promise to pay out of future tax revenues, and cannot easily be absorbed by the financial markets. A large volume of new government bonds can be sold to the public only at progressively higher interest rates. Thus, government deficit spending under a gold standard is severely limited.

The abandonment of the gold standard made it possible for the welfare statists to use the banking system as a means to an unlimited expansion of credit. They have created paper reserves in the form of government bonds which-through a complex series of steps-the banks accept in place of tangible assets and treat as if they were an actual deposit, i.e., as the equivalent of what was formerly a deposit of gold. The holder of a government bond or of a bank deposit created by paper reserves believes that he has a valid claim on a real asset. But the fact is that there are now more claims outstanding than real assets.

The law of supply and demand is not to be conned. As the supply of money (of claims) increases relative to the supply of tangible assets in the economy, prices must eventually rise. Thus the earnings saved by the productive members of the society lose value in terms of goods. When the economy's books are finally balanced, one finds that loss in value represents the goods purchased by the government for welfare or other purposes with the money proceeds of the government bonds financed by bank credit expansion.

In the absence of the gold standard, there is no way to protect savings from confiscation through inflation. There is no safe store of value. If there were, the government would have to make its holding illegal, as was done in the case of gold. If everyone decided, for example, to convert all his bank deposits to silver or copper or any other good, and thereafter declined to accept checks as payment for goods, bank deposits would lose their purchasing power and government-created bank credit would be worthless as a claim on goods. The financial policy of the welfare state requires that there be no way for the owners of wealth to protect themselves.

This is the shabby secret of the welfare statists' tirades against gold. Deficit spending is simply a scheme for the "hidden" confiscation of wealth. Gold stands in the way of this insidious process. It stands as a protector of property rights. If one grasps this, one has no difficulty in understanding the statists' antagonism toward the gold standard.

 http://www.gold-eagle.com/greenspan041998.html

Deficits are the hallmark of the WARFARE state 03.Mar.2005 11:15

Democrat Troll

Typical neo-con crap from Greenspan: "chronic deficit spending (the hallmark of the welfare state)" Okay, let's look around for some real welfare states -- Sweden and Australia come to mind. But Sweden and Australia have almost no public debt at all! Deficits are the hallmark of the WARFARE state. Not only that, but also warfare is basically counter-productive, so that underlying social, moral and environmental deficits result in addition to the monetary deficits!

As for the Democrats and Greenspan, let's get back to the factual record. Greenspan was appointed Chair of the Reserve in 1987, by the Reagan administration. He's been there ever since, because the Republicans have never yielded power to the extent necessary to roll back their treasonous program. Then think back to Jimmy Carter's appointment, in 1979, of Paul Volcker to chair of the Federal Reserve. Volcker really was nonpartisan and did not act to help the Democrats in 1980. Greenspan, by contrast, by failing to raise rates in 2003 and 2004 greatly contributed to the destabilization of the dollar which is taking us into the next Great Depression. And that -- in a period of undeclared war -- was clearly a partisan program promoted by Greenspan and the other "governors" at the "Fed" to support the Bush election effort.

What Democrats need to keep in mind is that the neo-con Republicans do not reciprocate -- they have no intention of playing by the rules. There is no fairness on which to build a bipartisan consensus -- unless that consensus is of, by and for the corporations and against the people. That is the struggle within the Democratic Party today. Between the DLC-ers like Clinton (along with the out-and-out RepublicRats like Lieberman) and the progressive Democrats led by Pelosi, Kucinich, Rangel and Conyers.

Democrats also have to realize that the future, if we are to have a future, lies in building a multi-partisan politic on the ruins of the old two-party system. We need to clearly grasp what has happened -- that the old two-party consensus has been destroyed by the neo-cons and the corporations. (Most likely, the old system was doomed by the end of the Cold War, anyway, because its fundamental weakness was that it depended on the "Communist menace" for its sustaining fuel.)

Our Democratic Party -- that we, the people, are taking back day by day -- needs multi-party democracy to survive! We have no choice but to advocate for the minority parties and the structural changes necessary to bring those minority parties into the electoral mix!

Greenspan is full of irrational exuberance... 03.Mar.2005 12:06

Pravda or Consequences

Democrats still want him because they have no idea how to operate without him.

Democrats still don't know how to win the White House and their numbers are getting smaller in Congress.

In 1967, when this was written 03.Mar.2005 12:57

2nd-op

The democrats were in power and there was a little war called vietnam that was being escalated. Maybe it's the well-war-fare state. But I'll settle for the warfare state in 1967 by the democrats, your right, greenspan missed the mark there.

In any case, the message was not about going back to the "old party system" or debating the left-right paridgm that so many cling to. Sure greenspan threw a hit in there, but the meat of what he wrote in 1967, completely contradicts his views of today(which is on purpose). This article advocates "sound money", something the democrats don't support or are clueless about(which MAY be on purpose).

The only representative I know of, that supports a "sound money" bill, is a republican, Ron Paul. Enough with the left/right dog and pony show. The republocrats control the debates, maybe you should write an article, as a "progressive" democrat, that exposes the hypocricy of the democratic party and the CPD. I did and I posted it to John Kerry's blog, it was censored.

You can go on and on about the "neo-cons", tell us something we don't know. We already know the story about the CPD and the green/lib presidential candidates being arrested, so you don't really have to write that, perhaps you should read it:
--------------------------------------
Crashing parties @ Brain-Wash-U:
"Are you willing to be arrested?"

On Oct. 5, 2004, that was the question posed to presidential candidate David Cobb when asked by Joshua Frank of dissedent voice. Contained within a review by the AP, you will find the story(one of few) of Libertarian AND Green party presidential candidates affirming this question in St. Louis Oct. 8, 2004, when crossing police barricades at the debate.

David Cobb had this to say from an alternate report from Progress.org. "The real crime is the corporate hijacking of our democracy. The corporations sponsoring these restricted, scripted and staged events, and their two-party accomplices, don't want the American people to know about the choices they have in this election. Both Big Business and the duopoly don't want you to hear voices calling for an immediate withdrawal from Iraq, or for health care for every American citizen."

Michael Badnarik said, "I have the freedom of speech and they have no authority to barricade that", with an Order to show cause. He was earlier blocked by security guards at the CPD(Commission of presidential Debates) headquarters in Washington. In an earlier statement from his press office: "Michael Badnarik, the Libertarian Party's 2004 presidential nominee, will debate John Kerry and George W. Bush in St. Louis on Friday. Or he'll go to jail instead."

There was an umbrella of protest also ensueing. Police were on hand to...keep the peace and police in riot gear where waiting in the wings. The real party however, was happening back on campus at "WASH-U", where students were eager to cath views of celebrities. "I saw Kerry's daughter", said one freshman reported by St. Louis Today. Nobody likes party poopers.
----------------------------------------

Let us know when you take back your party and they let third parties into the debates.

Because this pope is preaching the true gospel of capitalism. 03.Mar.2005 19:16

Red neck

Pouring billions of dollars into the stock market can't be bad.
Karl Marx most quoted remark: give them enough rope and they'll hang themselves... is more like: Give them enough rope and they'll hang everyone.

"In 1967, when this was written . . . " 03.Mar.2005 19:23

Democrat Troll

In 1967-1968, that was when Lyndon B. Johnson said, in effect, "I am sorry, I was wrong about Vietnam, I will not seek the nomination again, and -- if nominated -- I will not run." And I am sorry for YOU, "2nd op," if you cannot see the difference between a president such as Lyndon Johnson and one such as George W. Bush!

But don't worry, you won't have any problem recognizing when we take our party back. It isn't about ego -- it's about rock-hard reality.

don't get upset 04.Mar.2005 09:33

2nd-op

When you take back your party, does that mean you'll allow some actual opposition in a debate, open up the CPD, or will you keep the fake left/right mental midget fluff for us simpletons?

The rock-hard reality of silence is deafening.

Your not sorry for me, your feeling sorry for yourself. Don't feel sorry for me either. I'm not the one defending a corrupt and deceitful party. So actually I feel sorry that you still think, "hope is on the way", because it's not, it's inside you, not your party. They would like you to think that they will save you, but they won't. You can on your own though, I believe in you.

Why did LBJ say that? Because he was a democrat and a war profiteer making cash off the huey helicopters and another good ol' boy from texas. The only difference I see, is that lbj had a conscience that caught up with him. Was it jfk? vietnam? who cares. He was a democrat and he lied. Just like that other scumbag mcnamara. Go watch "fog of war". Watch that piece of shit shed tears because he is on his last legs. Is he diff. from Bush? Hardly. They all do this crap at the end of their lives, even democrats. boo-hoo.

You can defend "your" party if you want, I'll stick with defending american liberty and republicans, greens, libs, gays, muslims, and yes democrats. But I'm not blind to the fact that your boy kerry is not only a bonesman, but supposedly little dubsies sponsor as well. That's not a surprise when you take into consideration that they are also cousins through their great grand pappies in scotland.

What were we talking about again? Oh yeah, from economic theory to democrats. An article about economy/greenspan turns into defense of the democrats. A comment showing the hypocricy of greenspan through his younger year idealism turns into defense of the democrats. Looks like someone needs to get a thicker skin, if the democrats all think like you, we're screwed, oh yeah, they do. Just kidding, cheer up.

What do you think about cynthia mckinney? she's a democrat, do you support her and her inquiries into 9/11 to find out what the truth is? Have you written to the democrats telling them they should support her? Or are you more interested in social security and feeling sorry for yourself? look democrat troll, your here for the same reason as we all are. WE WANT CHANGE. I like democrats(whatever that means), but I judge people by actions not words. I saw allot of action coming from third parties this time out, I see change in them. So I'm keeping my options open. I know your a democrat but a fascist too? Is it ok for me to have a differen't opinion then you and still dislike bush, or does that make me an insta-dem?

Don't be part of the assembly line man, no need to argue with me, go show me rock-hard reality, go take it back, and you will discover that they don't want to be taken back, they want to spoon feed you enough dissent so that you feel like you are. Rock-hard reality is only what is in your head. My reality is differen't from yours and yours from mine. But these only exist in our own heads. Rock-hard reality is not always truth. Take a look at bush and his disciples of death. Truth is sometimes ugly, sometimes scary, and the truth is that it's much easier to go with a new car, because changing and patching parts will cost more(time) in the long run. You can always go back to driving that clunker, don't worry. Escape the chains(on your mind) that your masters don't want you to know are there.

Did I fail to appreciate someone's greatness? 04.Mar.2005 22:49

Democrat Troll

Okay, 2nd-op, in your comment "In 1967", you seem angry that I failed to appreciate your greatness in digging up something written by Greenspan in 1967. You say, "In any case, the message [i.e., the message of your repost of Greenspan] was not about going back to the old two-party system or debating the left-right paridgm that so many cling to." No, that was not your message, nor was that Greenspan's message.

Greenspan's message was a piece of conventional bullshit spread in college courses in economics, namely, "deficits == safety net and, therefore, safety net == deficits." That was his message, and that's why I posted what I did, saying it should be "warfare state" not "welfare state". I used counter-examples, notably Australia with a beautiful and extensive welfare system and virtually NO public debt! You indicated that you agreed with that contribution of mine, but you didn't like that I had changed the subject to the old two-party system and the left-right paradigm. But was it really such a big change of subject? -- because the whole thing that Greenspan represents is the "bipartisan" consensus that, significantly, is now dead! So, I don't think that I changed the subject -- I just took it where it needed to go.

I understand, 2nd-op, that you are into the high-tone philosophy of the gold standard and all that, along with Ron Paul, and that's fine. EXCEPT: I think you need to listen to yourself when you say, "I know your a democrat but a fascist too? Is it ok for me to have a different opinion than you and still dislike bush, or does that make me an insta-dem?"

You know, 2nd-op, in my initial post (that so offended you) all I did was criticize Greenspan's idiot economics and I never attacked you or any of your ideas. All I did was recite a little history and then go on to say that the "Democratic Party needs multi-party democracy to survive!" Those are my exact words. Am I the guy who needs to thicken MY skin? Just because I want to take the discussion farther than you like, you become the guy pulling shit out of YOUR ass and throwing it at me, saying, "Here's your shit!" NO, NOT my shit.

Okay, 2nd-op, you say, "When you take back your party, does that mean you'll allow some actual opposition in a debate or will you keep the fake left/right mental midget fluff for us simpletons?"

I said it once, but I'll say it again:

What I am generally saying, as the Democrat Troll, is that the only way for the Democratic Party to have a future is to open up the two-party system, including but not limited to the debates. The Republicans have won the old two-party game and they will never let it return to the old days of bipartisan consensus, unless it is consensus that the Republicans rule. I am trying to get through to Democrats and everyone else that the conflict within the Democratic Party is between those, like Clinton, who are foolishly clinging to the old two-party paradigm as to a dead horse and those, like the House Progressive Caucus, who understand the role of the Democratic Party at this time and place is to do everything possible to open up the two-party system. There is nothing to loose thereby and everything to gain.

You also ask, "What do you think about cynthia mckinney? she's a democrat, do you support her and her inquiries into 9/11 to find out what the truth is?"

Well, duuh! Cynthia McKinney IS a Democrat! You're the one who apparently doesn't know that or thinks that, as a Democrat, we should shun her!