Alan Greenspan

The Media Can't Stop Sucking Up to Alan Greenspan

Instead of treating him like a wise man, make him pay J.P. Morgan's fine

Alan Greenspan should be apologizing to the country. Instead, he's back without regrets—and the star-struck media lets him get away with it.

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IN SEPTEMBER of 2011, a fortyish budget connoisseur named Maya MacGuineas was feeling demoralized. She couldn’t believe that Congress and the president had nearly let the country default on its debt rather than reach a major deficit-cutting deal the previous summer. So she did what she had become unofficially famous for in the wonk circles of Washington: She threw a glamorous dinner party. MacGuineas’s friend, Virginia Senator Mark Warner, agreed to open his Alexandria estate to a coterie of bold-faced names.

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Yesterday I explained why the Fed's new report on family finances from 2007-2010 shouldn't prompt us to stop thinking about income distribution and start thinking about wealth distribution. Today I'm going to focus on something the Fed report has got me thinking about: the Republican-ness of the 2007-2009 recession and the weak recovery that's followed. By this I do not mean that Republican politicians are to blame for the recession. As it happens, they are--the recession began on President George W.

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Memo to the Washington Post news desk: Please read E.J. Dionne's excellent column today, which explains why the Republicans' $300 billion tax increase is really a tax cut. Also read my esteemed predecessor Jon Chait on the subject way back in January. Also listen to Alan Greenspan--you like Alan Greenspan, right?--in April.

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The Butterfly Effect

It is often said that the age of the Washington hostess is dead. Gone are the days, we are told, of Katharine Graham and Pamela Harriman, who assembled Washington power players around tables where deals were struck and alliances forged. But that may not be entirely true. The name Rima Al-Sabah doesn’t ring many bells to people outside the Beltway. Inside, it rings a lot. Al-Sabah is the wife of the Kuwaiti ambassador, Salem Al-Sabah. Since the couple arrived in Washington in 2001, she has become known as the issuer of invitations one doesn’t decline.

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Will Wilkinson asks why conservatives have almost uniformly abandoned Milton Friedman's monetarist views in favor of various hard-money approaches: Mr Friedman died a beloved figure of the free-market right. Yet it does seem that his influence on the subject of his greatest technical competence, monetary theory, immediately and significantly waned after his death.

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As the U.S. economy fails to recover, there is a growing fear that the United States has entered a phase of long-term decline. Conservatives blame “big government” for throttling entrepreneurship; liberals tend to take aim at Wall Street. Rolling Stone writer Matt Taibbi memorably described Goldman Sachs as “a great vampire squid wrapped around the face of humanity, relentlessly jamming its blood funnel into anything that smells like money.” Among less inventive critics, the term in vogue is “financialization.” According to author Kevin Phillips, who popularized this notion, financialization is “a process whereby financial services, broadly construed, take over the dominant economic, cultural and political role in a national economy.”Elements of this thesis can be found in scores of books, articles, and blog posts on the state of the U.S. economy. Phillips blames financialization not just for the “Great Recession,” but for “excessive debt, great disparity between rich and poor, and unfolding economic decline.” In their book, 13 Bankers, former International Monetary Fund (IMF) chief economist Simon Johnson and James Kwak blame financial factors for the “anemic growth” in the overall economy prior to the crash. And, in an influential essay—titled “WHAT GOOD IS WALL STREET?”—The New Yorker economics writer John Cassidy pointedly contrasts the period when regulators restrained the growth of the finance sector (when wages, investment, and productivity grew, lifting “tens of millions of working Americans into the middle class”) with the period of growth experienced by the finance sector since the early ’80s (when “financial blowups have proliferated and living standards have stagnated”). One thing is clear: Financialization, in some form, has taken place. In 1947, manufacturing accounted for 25.6 percent of GDP, while finance (including insurance and real estate) made up only 10.4 percent. By 2009, manufacturing accounted for 11.2 percent and finance had risen to 21.5 percent—an almost exact reversal, which was reflected in a rise in financial-sector employment and a drop in manufacturing jobs. It is also clear that high-risk speculation and fraud in the financial sector contributed to the depth of the Great Recession. But Phillips, Johnson, and the others go one step further: They claim that financialization is the overriding cause of the recent slump and a deeper economic decline. This notion is as oversimplified, and almost as misleading, as the conservative attack on the evils of big government.

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I am of two minds about this New York Times piece about Ben Bernanke's reluctance to openly endorse fiscal stimulus: He believes that without the Obama administration’s $787 billion stimulus program, the nation would have been worse off, and that Congress needs to continue to prop up the economy in the short run. He agrees that fiscal measures to support the recovery would probably make the Fed’s unconventional monetary policy more potent. But Mr.

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Ben Bernanke's “unusually uncertain” may be for our times what Alan Greenspan’s “irrational exuberance” was to the late 1990s—a phrase that captures the dominant mood without providing much policy guidance. As dissent continued to rise in the ranks of the usually united Federal Reserve Board, unusual uncertainty reigned supreme at the annual Jackson Hole meeting.

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