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Greenspan On Market Turmoil And Monetary Policy Distortions Impacting Markets, Business Investment And The Real Economy; Admits ‘Too Big To Fail’ Banks Ongoing Problem – Eric Dubin

greenspan on bloomberg -TND Exclusive:  Eric Dubin

Alan Greenspan was interviewed by Bloomberg “Surveillance” journalists Tom Keene and Mike McKee.  The interview was released today on the “Surveillance” program.  McKeen introduced the interview by noting, “I’ve never seen him quite this pessimistic.”

To listen to the full interview as broadcast, advance to about the 24 and a half minute mark: click here to access the mp3 file.

Greenspan addresses problems growing out of low and negative interest rates, with particular emphasis on the distortions they create and the impact to long-term productivity in the real economy.  That discussion is on-target.  But when Mike McKee directly asked Greenspan about financial markets, Greenspan’s point about productivity is, arguably, slightly out of context and the exact sort of slippery “re-framing” Greenspan is well equipped to execute.

Mike McKee:  “The markets these days seem to be telling us, that we’re in trouble.  Are we?”

Greenspan:  “Yup.  We’re in trouble basically because productivity is dead in the water.”

With that response, Greenspan didn’t have to explicitly declare a direct causal link between monetary policy and the chaos we now see in financial markets – even though he does “go there” by default, when spotlighting monetary and other policy problems throughout the remainder of the interview.

In any event, this is an interesting interview because Greenspan speaks far more truth now that he no longer serves as the chief bubble blower and spin master of the Federal Reserve.  Topics discussed include:

  • Dodd-Frank didn’t fix the problem of ‘Too Big To Fail’ banks (never mind that he helped create the problem of ‘too big to fail banks in the first place);
  • Where the US needs to be with China in five to ten years;
  • What is happening in China’s economy, including what happens as China’s productivity level gets closer to the level of the United States;
  • Price-to-earnings ratio valuations in the equities markets are distorted (higher) because of distortion of signals – primarily, artificially low interest rates (this was a passing comment in the interview that wasn’t expounded upon)
  • Distortion to capital investment process and real economy impacts

Greenspan makes many valid observations, and he speaks more truthfully now that he no longer serves as Fed Chair.  But Greenspan’s discussion about the problems associated with excessively low and negative interest rates and monetary policy in general is downright surreal.  He’s arguing against the failings of everything he played a major role in manifesting.  History will not judge Mr. Greenspan kindly, but it’s refreshing to see him toss out some truth even if his principle motivation is the resuscitation of his pathetic legacy.

Here’s a video excerpt.  For the full interview, see the mp3 link above.

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About the Author

- Mr. Dubin is the Managing Editor of TheNewsDoctors.com. He has 25 years of experience as an independent buyside securities and global macro analyst. He has well over a decade of experience as a financial journalist, editor and political analyst. He's primarily an autodidact, but his formal education includes degrees in economics, international relations and MBA. He welcomes feedback on his articles and will make an effort to respond to comments. Email Eric by sending to "Eric" and then @TheNewsDoctors.com. He can also be "followed" on Facebook: https://www.facebook.com/EricDubin

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