Greenspan’s “invisible hand”

[donsu]

http://onlinejournal.com/artman/publish/article_1805.shtml


Tuesday’s market meltdown; Greenspan’s “invisible hand”


Tuesday’s stock market freefall has Greenspan’s bloody fingerprints all over it. And, no, I’m not talking about Sir Alan’s crystal ball predictions about the impending recession; that’s just more of his same circuitous blather.

The real issue is the Federal Reserve’s suicidal policies of low interest rates and currency deregulation which have paved the way for economic Armageddon. Whether the Chinese stock market contagion persists or not is immaterial; the American economy is headed for the dumpster and it’s all because of the cunning former Fed chief, Alan “Great Depression” Greenspan.

So, what does the stumbling Chinese stock market have to do with Greenspan?

Greenspan was the driving force behind deregulation that keeps the greenback floating freely while the Chinese and Japanese manipulate their currencies. This gives their industries a competitive advantage by allowing them to consistently underbid their foreign rivals. Big business loves this idea, because it offers cheaper sources of labor and allows them to maximize their profits. It’s been a disaster for Americans though, who’ve seen their good paying jobs increasingly outsourced while US manufacturing plants are dismantled and airmailed to the Far East.

-long snip -

We should expect to see bigger and more destructive market fluctuations, as investors get increasingly skittish over bad economic news and weakness in the dollar. Tuesday’s 416-point somersault is just the first sign that Greenspan’s Goldilocks’ economy is cracking at the seams
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rummy and greenspan still have desks in the shadow govt.

[orwell]

1. A bit flawed...

...While I truly detest Greenie and his policies, it seems to me that the logic of this piece is a bit flawed. China's competitive advantage is primarily due to its vast cheap pool of increasingly skilled labor. This has very little to do with currency advantage as the author posits. China's currency could appreciate by 50% and they would still have this advantage. It is very difficult for a modern western labor force to compete with skilled labor rates of pennies an hour.

The author is correct however that Greenspan was a horrible Fed Chairman. His endless easy money policies in the face of both the stock and real estate market bubbles have caused grave structural damage to both the currency and the fiscal health of the nation. Whether the true magnitude of the scope of his ineptitude will ever be felt lies in the our shrinking ability to foist our financial house of cards on the rest of the world's gullible investors.

History does not offer a bright future for Greenspan's credit crack pipe approach...