Now that Greenspan is no longer working for the government, he's once again turned into a capitalist.
In a rant he recently wrote for the WSJ, he said “The United States, and most of the rest of the developed world, is in need of a tectonic shift in fiscal policy ... Incremental change will not be adequate.”
He went on to say that “Perceptions of a large U.S. borrowing capacity are misleading,” and current long-term bond yields are masking America’s debt problem. “Long-term rate increases can emerge with unexpected suddenness,” such as the 4 percentage point surge over four months in 1979-80.
“The federal government is currently saddled with commitments for the next three decades that it will be unable to meet in real terms,” Greenspan said. “[The] very severity of the pending crisis and growing analogies to Greece set the stage for a serious response.”
He also says that yields on U.S. Treasuries have decreased in recent months (demand has increased) because of the European debt crisis--a situation that is likely only temporary. This is of course directly contradicting Bernanke's latest tirade against the Gold Rally in which he suggested that the low yields on US Treasuries in recent months were a sign of long-term stability (a pack of lies Latewire immediately called out).
10-year Treasury notes yielded 3.20 percent as of 12:11 p.m. in Tokyo on June 17th, down from the year’s high of 4.01 percent in April and compared with as high as 5.32 percent in June 2007, before the recession began. Yields continue to be low “despite the surge in federal debt to the public during the past 18 months to $8.6 trillion from $5.5 trillion". Greenspan says this shift in demand from European into American Bonds is “temporary.”
“Our economy cannot afford a major mistake in underestimating the corrosive momentum of this fiscal crisis,” Greenspan said. “Our policy focus must therefore err significantly on the side of restraint.”
I couldn't have said it better myself. Can you please tell your former underlings that?
UPDATE: Peter Schiff just released a VLOG where he said almost exactly the same thing. (144,242)
The following is an excerpt from this article written by Alan Greenspan in 1967--four years before the end of the gold standard (by Richard Nixon).
Recently, Greenspan told Ron Paul he still stands by every word of this.
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. ... 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. ... 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 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.
It would seem that now Obama can stop blaming poor people for the housing bubble collapsing. There is not now nor has there ever been a "Sub-prime Mortgage Crisis." It was an "ARM Mortgage Crisis."
New data suggests that adjustable rate mortgages are foreclosing for both prime and sub-prime at the same rate.
Naturally it spun a better tale to say that the deadbeats who were too poor or too drug-addled or too jailed to be recipients of the "prime" moniker were the bastards responsible for our recession. Unfortunately for us, the problem is not that simple/ridiculous.
It wasn't just that "poor people got drunk," it's that "everyone got drunk" at the same time.
Not only does this point to the devastatingly largeness of the bubble but it also begs the question even more: How did this problem get so big? What fundamental factor do all these people, neighborhoods, banks, and interest rates all have in common?
The supply of credit, maybe? Thanks Greenspan. For everything. (112,450)
Critics in Congress, in academia and elsewhere worry that the Fed's unprecedented actions - including financial backing in March for JPMorgan Chase & Co.'s takeover of Bear Stearns Cos. - are putting taxpayers on the hook for billions of dollars of potential losses. They also say it encourages "moral hazard," that is, allowing financial companies to gamble more recklessly in the future.
In Greenspan's latest book, he takes a swipe at some of the bailouts of the US banks.
Greenspan, 82, who ran the Fed for 18 1/2 years and was the second-longest serving chief, says he is concerned that Capitol Hill will look to the Fed's actions "as a wondrous new font of seemingly costless federal funding - a magical piggy bank." ...
The ex-Fed chief says he is skeptical of a sweeping plan, put forward by Treasury Secretary Henry Paulson, that would turn the Fed into a uber cop of sorts - responsible for policing financial market stability. "Much as we might wish otherwise, policymakers cannot reliably anticipate financial or economic shocks or the consequences of economic imbalances," Greenspan says.
He, unfortunately, is somewhat in favor of bailouts in some "extreme" circumstances, however he disagrees with the Bear Stearns bailout and how it was done.
The United States has long "abandoned the notion that we should leave crises to be resolved solely by the marketplace," Greenspan says in making the case for new powers in this area.
...
"We need laws that specify and limit the conditions for bailouts - laws that authorize the Treasury to use taxpayer money to counter systemic financial breakdowns transparently and directly rather than circuitously through the central bank as was done during the blowup of Bear Stearns," Greenspan wrote in a new epilogue to the paperback edition of his memoir, "The Age of Turbulence: Adventures in a New World." (The paperback will be released Sept. 9; the hardcover came out last year.)
However, the bailouts Greenspan has in mind are not without a catch, which is a far cry from the airline bailouts of 2001 et al.
Greenspan envisions the formation of a group akin to the Resolution Trust Corp. to step in, take a troubled company into conservatorship, wipe out the equity, impose some charge or "haircut" on its debts before guaranteeing them and then selling its assets.
So if Greenspan had his way, certain institutions would be allowed/forced to die, but under the parachute of the treasury so as to limit foreseen market panic. This is not quite the monetorist love song we've all come to love in Greenspan's musings. Obviously politically hard-wired institutions would still be selected for federal assistance before others, but it's still a heck of a lot more in the spirit of laissez faire than throwing a bucket of money at a failing corporation that needs to die.
He went on to say that “Perceptions of a large U.S. borrowing capacity are misleading,” and current long-term bond yields are masking America’s debt problem. “Long-term rate increases can emerge with unexpected suddenness,” such as the 4 percentage point surge over four months in 1979-80.
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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.
It would seem that now 
