T Nation

Alan Greenspan - Ayn Rand's Avenger?


#1

Alan Greenspan was a member of Rand's inner circle back in the 1960's. Many have wondered how he came to be the Fed Chairman and why.

In her novel Atlas Shrugged, the main character hears himself sentenced to slavery, for being intelligent. He say: "I will put an end to this. I will stop the motor of the world." Could Alan envision himself as the person who does this?

http://www.counterpunch.org/whitney12172007.html

"Greenspan also adds this revealing bit of information in his article:

The value of equities traded on the world's major stock exchanges has risen to more than $50 trillion, double what it was in 2002. Sharply rising home prices erupted into major housing bubbles world-wide, Japan and Germany (for differing reasons) being the only principal exceptions." ("The Roots of the Mortgage Crisis", Alan Greenspan, Wall Street Journal)

This admission proves Greenspan's culpability. If he knew that stock prices had doubled their value in just 3 years, then he also knew that equities had not risen due to increases in productivity or demand.(market forces) The only reasonable explanation for the asset inflation, therefore, was monetary policy. As his own mentor, Milton Friedman famously stated, "Inflation is always and everywhere a monetary phenomenon". Any capable economist would have known that the explosion in housing and equities prices was a sign of uneven inflation. Now that the bubble has popped, inflation is spreading like mad through the entire economy.

Greenspan is a very sharp man. It is crazy to think he didn't know what was going on."

Alan may have single-handedly created conditions necessary for the collapse of the world-wide system, just like in the novel. Fascinating!!


#2

I hardly think he made economical decisions (which at the time helped the US) in order to live out the life of that character.

He may have had morals that comply with Rand's objectivism theory, but that means that he would live his life, for himself as an "egoistic" person and not follow a script which would put him in the realm of the "second-hander" (as Rand called it)


#3

In Shrugged, highly intelligent people do the opposite of what you'd expect. One guy could be the greatest industrialist in the world yet becomes a bum. He destroys his family's copper mining business, rather than let it feed looting governments.

If Alan, who is brilliant, does something like described in the link, he did so on purpose. He built up the house of cards to encourage it's collapse all the sooner. Alan does NOTHING without purpose.

"I will stop the motor of the world."
--- John Galt


#4

I still disagree.
The economic downturn can't be blamed on Greenspan. I don't know who is to blame, if it's the consumers or the financial institutions or a mixture, but the federal reserve does not have as much power as people think.


#5

Everyone is to blame for their own financial situation; however, if you do not think that the Fed has to do with malinvestment then you are deluding yourself or you do not really understand the reason the Fed exists.

The only reason we have a Federal Reserve is to set interest rates. What is the point of manipulating interest rates outside of the market? It is to give incentives to would be borrowers to take out loans that they otherwise might not have because of high interest rates. Keynesians and supply-siders, backwardly, believe incentives and debt are necessary for economic growth -- though I would argue that growth isn't necessary with a stable currency.

There is a catch-22 with this idea: On the one hand we have a system that inherently causes inflation so we require growth to keep up with the devaluation of the currency; on the other hand if the Fed didn't exist growth would be a function of our ability to save and inflation would be a non-issue. Humans abhor saving because we naturally have an immediate time-preference for goods -- in other words, I want it now!!

We could debate this but it should be obvious that consumption and production must be a sum-total of each other at the very least. We cannot have consumption without production. Wealth cannot come from borrowing. It must come from production. How else can these loans get paid back if we are not producing more than we are spending.

This downturn is just a correction in the market forces as a result of malinvestment which we can debate was brought on by artificially low interest rates. People tend to take less risk when they have to use their own money. This is why saving is good and too much debt is generally not good.


#6

People can certainly change but he was a pretty devout follower of Rand's. For him to be in her inner circle, he had to be pretty intense in his beliefs. He was a serious gold-standard guy, also.

For him to then massively inflate a fiat money system means that either he accelerated the system to destroy it, or he gave up and became a pragmatist. This would be very uncharacteristic of Rand's followers.


#7

I remember reading about Greenspan's thoughts on the current housing shenanigans. I think he said it was more like a froth, and not a bubble, and he wasn't too concerned about it because no one could have really predicted the effects of "a bunch of little froths" and not "one big bubble". Or something like that.


#8

My friend, the Fed has 2 formal missions that are codified in law: to promote maximum employment and to maintain a stable purchasing power. My point was that the economy itself depends on improvements in productivity, educational levels or whether commodity prices are going high or low.


#9

Headhunter, or anybody, let's keep this going! Any Rand readers here?