Does Alan Greenspan Deserve Credit For The Dot Com Bubble Too?
from the what-else-can-we-pin-on-him? dept
Over the last few months, there's been an increasing finger of blame pointed at Alan Greenspan, suggesting that his policies while running the Fed created the housing bubble which recently burst. However, others are going even further. A new book is suggesting not only is Greenspan responsible for the housing bubble, but he should take credit for the dot com bubble as well.While the book suggests this in a negative manner, as we've pointed out for years, bubbles aren't necessarily a bad thing -- except for the people who got swept up in the hype and invested at the wrong time. Historically, bubbles tend to act as a great driver of innovation by getting a lot of innovative ideas thrown against the wall quickly to see what sticks. While bursting bubbles tend to be painful, the "good" things that come out of them tend to be quite important.
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Filed Under: alan greenspan, bubbles, dot com bubble
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That's a dumb thing to say..
That's about as smart as saying that crashing planes into buildings is good because it drives innovation into making stronger girders. There's a reason it's called a bubble, and its not cause it reflects pretty colors in the bright sun.
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Re: That's a dumb thing to say..
Just a lot of bad, irrational investing decisions.
Bubble are painful indeed, but we cannot deny the positive impact that it have on consumers, no?
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Natural Selection
It's analogous to evolution. Some of the events that cause the greatest leap forward are when there are cycles of massive extinctions then rapid expansions. It gives variants a time to flourish, then gets rid of all but the top performers. A school of thought believes that the ice-ages performed that function on humans.
There's a lot of Darwinism in the free market.
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Broken window economics
So far as the suggestion that there are benefits from bubbles, it, like the argument that wars promote technical progress, is an example of the broken window fallacy:
http://en.wikipedia.org/wiki/Parable_of_the_broken_window
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He may have contributed to its start...
http://en.wikipedia.org/wiki/Irrational_exuberance
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He may have contributed to its start...
http://en.wikipedia.org/wiki/Irrational_exuberance
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He may have contributed to its start...
http://en.wikipedia.org/wiki/Irrational_exuberance
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the latest Chair of the Fed is very quiet. now, what can you make of that? are we going to point fingers at him also?
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Fed Chair not that influential
There's a lot of Darwinism in the free market.
Assuming there's any such thing as a "free" market, witness the oil industry, or the telecoms, or the banking industry, which, even with regulation up to the eyeballs, managed to squander BILLIONS of dollars on risky loans.
Of course, it's easy to talk about abstractions like "drivers of innovation," when it's not your house that's being foreclosed, or your pension that's down the drain, or your job that's lost. There are real people behind those numbers, many of whom did nothing wrong.
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Bubble and bust
Nice job, Alan.
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looked at every possible angle of the world economic picture.
He tried to convince some g.w. politicians, that if they continue with the cut taxes for big business, and fund a war,"which is largely about oil" it will create a huge deficit.
the politicians did not listen.
read his book and try to understand just what is at stake
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Not a new accusation
I get the "bubbles are good" argument, but we should not make that statement too generally. The stock market bubble in the late 1990's was eerily similar to the one seventy years earlier, and when that one popped we had 20% unemployment for almost a decade.
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The housing bubble was a different ballgame, however. There was little innovation and what was built will not be of lasting value.
What got built were a lot of McMansions and overpriced condos. These are depreciating assets that won't add anything positive to the economy in the long term. If some do not find buyers they will sit vacant and if left untended they may quickly deteriorate, to the point where they can't even be inhabited.
The only "innovations" were elaborate new ways to package risk to investors, which resulted in widespread fraud and trillions of losses, which we are now suffering the consequences of.
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