The Hindu Business Line : `Greenspan has rarely been shy in contradicting himself'

Chennai March 24 Mr Alan Greenspan is under much flak these days. `Greenspan blamed for subprime crisis,' says Globe and Mail. `Senators blame mortgage crisis on `neglect' by Fed, Greenspan,' notes Seattle Times. And the US Senate Banking Committee's Chairman, Mr Christopher Dodd, is reported to have laid out a `chronology of regulatory neglect', which speaks of how banks and other lenders `loosened their standards for making riskier mortgage loans during the boom,' as www.guardian.co.uk states in a March 23-dated report.

"To my knowledge Alan Greenspan has always done what is good for Alan Greenspan regardless of costs to society," frets Mr Ravi Batra, a professor of economics at Southern Methodist University, Dallas. On www.ravibatra.com, Mr Batra has posted the cover image of his recent book `Greenspan's Fraud'.

Self interest

Mr Batra recounts, in an interaction with Business Line, how as far back as 1983, as Chairman of the Social Security Commission, Mr Greenspan had assured the public that their increased taxes would be stashed away in a trust fund to pay for guaranteed retirement benefits in the 21st century. "Then within six months after the tax increase was passed by the legislature, he turned around and recommended a cut in retirement benefits to balance the federal deficit that had resulted from a major fall in the income tax rates that mostly burden the rich individuals."

According to Mr Batra, there appears to be evidence that Mr Greenspan knew in advance that the higher social security taxes would be gobbled up by the budget deficit, so that there would be no cash saving in the trust fund. A fact borne out by history, rues Mr Batra. In 1978, he wrote a book on world history titled `The Downfall of Capitalism and Communism', in which he predicted the fall of both the systems by or around the year 2000.

"Mr Greenspan has rarely been shy in contradicting himself," quips the Dallas professor. "It all depends on where his self interest lies. He changed his views repeatedly about macro-economic policy after his appointment as the chairman of the Federal Reserve in 1987, so that US presidents would reappoint him to head the Fed."

Changing tune

On March 16, Mr Pedro Nicolaci da Costa wrote on www.reuters.com an analysis titled `Greenspan changes tune, Wall Street cries foul'. "Mr Alan Greenspan is causing more of a stir in retirement than he did as Fed chairman, shocking many investors with a radical make-over: irrepressible optimist turned curmudgeonly bear," opens the essay.

Reacting to this, Mr Batra says, "I am surprised it has taken all this time for the financial markets to discover the real Greenspan. To me his modus operandi became clear in 2004 when I wrote the book, `Greenspan's Fraud'. And the problems that are now besetting the real estate sector in the US are also not a surprise to me, as I have predicted them in advance in my latest work, `The New Golden Age: The Coming Revolution against Political Corruption and Economic Chaos'."

Home values have substantially accelerated in the new millennium, and this is "precisely the stuff of which bubbles are made", points out Mr Batra in `The New Golden Age'. Bubbles "pick up speed after they are formed, and keep expanding for a while, until they can expand no more," he describes. Then? "They burst".

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`Greenspan has rarely been shy in contradicting himself'