Saturday, September 20, 2008

Italian Finance Minister: Greenspan As Bad As Bin Laden

Via Tim Iacono I see L.A. Times reports how political leaders in Europe mock America for its messed up financial system.

Most however do not appear to understand the cause of the crisis and instead talks about how the root cause is "savage capitalism". This is of course nonsense. While it is certainly the case that Wall Street with its incompetence and recklessness deserve blame and thus have gotten what they deserve now (or more correctly would have gotten what they deserved if the government hadn't bailed out most of the failed companies), the point is that the government through its low interest rate policy and previous bailout made it profitable for them to create the bubble. Without these government interventions, it would have appeared less profitable and more risky to create the housing bubble.

The politician that comes closest to the truth is Italian finance minister Giulio Tremonti who says that Alan Greenspan is to blame and that Greenspan has harmed America as much as Osama bin Laden. I certainly agree with that assessment, although it appears that not even Tremonti fully understands why Greenspan is the man most responsible for this mess, as Tremonti do not point to his interest rate policy but instead says it was failure to properly oversee Wall Street excesses.


Blogger Phastidio said...

You made the point. Actually, Mr.Tremonti doesn't even understand that the money supply excess drove to this mess. He usually blames "globalisation", and he loves to say that China entered "too soon" the WTO. Ludicrous stance. Actually, Mr. Tremonti dreams of a full scale government bailout, even in Italy, the last socialist country in the West (irrespective of the fact the incumbent government is from centre-right), where the Alitalia farce is undergoing. So, you're right, he blames "finance", not central banking recklessness. He can't understand.

7:45 PM  
Anonymous Justin Rietz said...

Somewhat off topic, but here is a good interview by Bill Moyers with Kevin Phillips. Phillips really takes it to Greenspan, government bailouts, and loose money policy over the past 20 years in the U.S.

7:32 AM  

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