A Benjamin Cole post
Sad to say, a defeatism or resignation has set in among economists, to the effect that the current economy is okay, the best we can do. Some rhapsodize for minor deflation as an economic cure-all. Even some of my Market Monetarist brethren have sunk into lethargy.
So happy I was when Alan Greenpsan, Fed Chief 1987-2006, spoke to CNBC Feb. 27 and said “effective demand is extraordinarily weak.”
“The way I measure it, it’s probably tantamount to what we saw in the later stages of the Great Depression,” Greenspan told anybody watching CNBC’s Closing Bell.
No coincidence that the Greenspan Years are also largely the “Great Moderation” years, in which the US economy grew about a little more than 3% real annually, and inflation was just under 3%.
Yes, Greenspan did not turn ninny at 3% inflation. The old Fed chief also told CNBC that Q4 real GDP growth could peg in at under 2%. In short, we have in the U.S. feeble growth, and dead inflation—conditions absent in the Greenspan years.
The fact that the bond market is anticipating that the Federal Reserve will raise interest rates, yet the yields on the 10- and 30-year U.S. Treasuries are falling is an indication of how weak the overall global economy is, Greenspan told CNBC viewers.
Greenspan’s talk is another reminder of that the present economics profession, especially the right wing, has shifted into self-destructive brand of reactionary defeatism. (The left wing is afflicted with deficit-spending mania, btw.)
Who remembers anymore that Milton Friedman blamed three recessions on tight money: the Great Depression, the 1957 U.S. recession, and the Japanese perma-gloom post 1992. Name today a single right-winger who avers the Fed caused a recession and retarded growth post-2008 thanks to tight money. It is simply not done.
And Greenspan, a President Ford White House economic official and then GOP-Reagan appointee to the Fed (reappointed by both GOP President Bushes), today would chart a more-expansionary course than “dovish” Fed Chief Janet Yellen and the FOMC.
Alan Greenspan: Would you take the job again, for a just a few years?