{"article":{"id":224945,"heading":"The Master of Bubbles","author":"Uwe Jean Heuser","created":"2009-02-25 13:26:14","modified":"2013-11-11 00:59:52","last_modified":"Mon, 11 Nov 2013 07:59:52","article":"

THE MASTER OF BUBBLES

With cheap money, Alan Greenspan fueled a boom that led directly into crisis. Who profits? Uwe Jean Heuser argues with his alter ego

By Uwe Jean Heuser

[This article published in: ZEIT Online, 3\/38\/2008 is translated from the German on the World Wide Web, http:\/\/images.zeit.de\/text\/online\/2008\/14\/kolumne-heuser-finanzkrise<\/a>.]




Alter ego: The great capitalist bet by Alan Greenspan had loose ends.

\tEgo: What do you mean?

\tAlter ego: Don’t be so ignorant! As the revered godlike head of the Federal Reserve, he pursued a policy of cheap money. Whenever the financial markets began to correct their own madness, he opened the floodgates for more money. The great boom on the stock exchange and with real estate was prolonged until the great crash occurred.

\tEgo: The power of a central banker is not absolute.

\tAlter ego: Obviously Greenspan did not act alone. The government of the US supported him through extraordinary tax cuts, spending programs and the war in Iraq. The rest of the world joined in by supplying the US with goods at a ridiculous dollar price and also lent them money. There was more than a bubble on the real estate market. The whole United States developed into a bubble.

\tEgo: The rest of the world, especially German exporters, joined in the game for their own prosperity. The whole world economy had something from the eight-year upswing of the US. The US and its consumers were the motor for an impressive phase of worldwide economic growth.

\tAlter ego: What is the solution now?

\tEgo: The economic model does not work. This was also clear to Greenspan. Still the core argument is: past years produced so much prosperity through higher stock prices and new jobs we can now get through this crisis in good shape.

\tAlter ego: But the game has been driven so far that the present crisis is more serious than any crisis since the world economic crisis in the 1930s. Banks collapse. Houses are put up in public auctions in Great Britain and Spain, not only in the US. More than a recession is coming to us. We live with the danger that the world finance system will break down. Then good night for a long while!

\tEgo: In any case, there is the Federal Reserve. The state has matters in hand.

\tAlter ego: But at what price? The public authority buys the toxic assets from the financial sector. It rescues whole banks for billions upon billions. The population rubs its eyes. Thousands upon thousands of banks put billions in their pockets, committed fraud and now Father State comes and generously helps them out.

\tEgo: When the domino gets going, the financial system collapses. Then normal savers and employees are impacted.

\tAlter ego: The price is enormous. The horde of bankers is given signals so they can play like madmen the next time and commit massive fraud. The state is ready to pay for their madness.

\tEgo: Wait a minute! Everyone joined in. Everyone – private banks and state banks, private and public pension funds, investment funds and hedge funds – wanted high profits.

\tAlter ego: Those profits were based on real estate fraud and collective blindness for risks. Greenspan and all those around him threw everything on bets. Today the master himself writes obscurely of behavior-guiding reality that is key for understanding the system. Amazing! He should face his responsibility.

\tEgo: Still his policy – unlike the European Central Bank – created an enormous prosperity in the US and other parts of the world like China.

\tAlter ego: How rich China is will be revealed when the price of the dollar ends its downhill run and the US forces up inflation. We know this mechanism from the 1970s. The US experiences a long growth phase, feels powerful, marches into war, becomes indebted like crazy – and then lets the rest of the world, especially its creditors, pay for that through inflation.

\tEgo: At that time, the world ran well. No other country consumed with such optimism and simultaneously pushed the development of the financial markets. The prosperity of the world grew enormously through the boom that is now ending.

\tAlter ego: But whose prosperity? In the US most employees have not gained more purchasing power since the 1990s. They only felt richer because their houses and perhaps their securities seemed to be worth more. What about the present? Now they have hit the ground again and depend on their wages that are not higher than in the past. Only those above won, above all the top one-percent of the US. Investment bankers and hedge fund managers keep a large part of the new prosperity for themselves. Top managers have multiplied their salaries. Many well to do have brought their share in dry dock. The rest have done nothing.

\tEgo: Many have jobs and chances for ascent. That is very important but obviously does not fit your distribution concept.

\tAlter ego: In the next crisis, their chances will be gone again.

\tEgo: The market economy does not function. Growth opens many new chances for education, earnings and ascent. Those above profit more than those below. People in China and India force down the price for labor and simultaneously drive up the price for oil and energy. Greenspan and the western market economy cannot really change this now.

\tAlter ego: At the end the average citizens in the US and Europe will have nothing of the big boom. That is the greatest mistake in Greenspan’s bet. The world stares at growth so intensely that it forgets distribution. Now when it is too late, the world reflects a little on this important question.

\tEgo: You don’t want to understand this. The distribution of prosperity is determined by the conditions in the world economy that are now often directed against western workers. Therefore the growth phase was so important because the spiral of high unemployment and falling wages could have been averted.

\tAlter ego: That is your sad theory that cannot be proven in retrospect.

\tEgo: Just as little as yours can be proven.

<\/p>\n","contact":"mbatko@lycos.com","link":"http:\/\/www.mbtranslations.com","address":"","phone":"","parent_id":0,"mime_type":"text\/plain","summary":"As the revered godlike head of the Federal Reserve, Greenspan pursued a policy of cheap money. Whenever the financial markets began to correct their own madness, he opened the floodgates for more money..The world stares so intensely at growth that it forgets distribution.","numcomment":4,"fileurl":"\/uploads\/","filesize":null,"article_url":"\/news\/2009\/02\/224945.php"},"attachments":[],"comments":[{"id":224949,"heading":"ego's can alter but economies sag anyhow","article":"interesting article above, but not revealing enough...\r\n\r\nlet's instead state some of this Greenspan's and his advisors\/ cohorts\/ bosses \/ cronies' actual acts of blunder, \r\nof corruption & collusion, \r\ntheir lies and stories told to 'calm the people' and remember when it was 'appropriate' to have no disputes allowed, no questions of his 'truths' made possible.\r\nWho all set up this guy and his schemes and claimed them as beyond being reviewed or revealed in their errors.\r\n\r\nWhat were exactly his errors and how did they play out in the \r\nUSA bubble we are bursting now, like a hotwater filled \r\nballoon we have broken busted ?\r\n\r\nSo who made Greenpan such a 'guru' and righteous man anyhow?\r\n\r\n\r\nWho claimed His know-how was oh so excellent and his results to be touted as if he was the great-know-it-all - behind a bank that is not a USA Federal government Bank at all, just a pretended name one to fool most USA citizens who dont know who prints their worthless dollars? Isn't it just a contracted privatized business ? Hasn't it been so for a long long time ?\r\nAnd fooled people that it was OUR govt that was behind our dollar and the printing of it was a responsible and accounted for process? \r\n\r\nFiddling with inflation was maybe helpful,sometimes... but not if the end is that a few years later that same fiddling led to OUR USA burning... like Nero's burning.... of our savings, our cost basis, our homes & buildings, and especially our trust in anyone any more.\r\n\r\nWho promoted Greenspan and his ideas as being so holy as never to be questioned or doubted at all ?\r\nWhich media spoke up earlier and told us to watch out for what he was promoting ? \r\nMust have been some. \r\nWho were they ? \r\nWhy were they sidelined ?\r\nBy whom ?\r\n\r\nand why is hestill allowed to say anything in his own favor now and not be pilloried, guillotined, shamed and publically humiliated by being walked thru the streets of Wall St [NYC] as the unholy ruler of the failed banking system that he helped uphold or even sustain ?\r\n\r\nwhy is this econ-celebrity allowed to continue to keep his prior salary and bonuses too ?\r\n\r\nhuh ?\r\nhuh?\r\nI'm dismayed, disgusted, disappointed, distrustful, and ready for more active responses than ego-playing, like mind-f....ing.\r\n\r\nbut the article elicits some reaction here, so that is something \r\nanyhow...\r\n\r\n\r\n\r\n","author":"sidestepper","parent_id":224945,"mime_type":"text\/plain","created":"2009-02-25 17:38:00","modified":"2009-02-25 17:38:00","fileurl":""},{"id":224956,"heading":"what a word hash-with garnish","article":"Despite the dance of mirrors, the truth is that powerful and degenerate families have asserted their complete control over our lives. And in the ensuing chaos they want to offer a fuedual security devoid of any personal liberties.\r\nYou see, after capturing the currency system, they began a program of assimilation and command of the host. The host is the American people.\r\n\r\nThe symtoms of deseased government \r\nlies become mantras \r\nthe law is selective beyond the reach of the majority\r\nconflicts of interests are the required norm\r\ncriminality is a prerequsite for office\r\nnational security for them, surveillance for us.\r\nwait till our weapons are confiscated. Then we'll be slaves in totality with no options left under the hoof of a royal class again.\r\n\r\n","author":"work in progress","parent_id":224945,"mime_type":"text\/plain","created":"2009-02-25 21:54:22","modified":"2009-02-25 21:54:22","fileurl":""},{"id":224958,"heading":"SAVE us our weapons of choice ! yeah","article":"yeah ! many of us agree but dare not say so openly in USACalifurnia because it is not PC in this sunny climate.\r\n\r\nyes, we are sunk under what is called "our govt"\r\nbut is not 'ours' at all, not those who stay and still work here in the USA, in CA, in LA... so while the 89% who are not living on their capital gains, or are in\/have overseas corporations or who are not indebted to overseas owners already.\r\n\r\nand this 89% is not protected in any way ...\r\nnot by dollar currency value\r\nnot by investment into retirement accounts\r\nnot by the credit debts they carefully repay monthly\r\nnot by their house deeds when "eminent domain" occurs and they have "no choices"\r\nnot by their bare knuckled hands either....\r\n\r\nI have mine. \r\nAnd promise to use it... but only if actually in danger and as necessary. No hiding behind bushes. No drive bys needed. Just being ready for anything and anything that is already here...\r\nand happening right now...\r\n\r\nno, I'm not crazy or scared or paranoid....tho many who want to take away my weapons want to label me that way to keep all the Power and threatening powers to themselves...\r\n\r\nno, I dont need the FBI or NSA to surveillance me more than we all 89% are already\r\n\r\nno, I am not the one that needs to be careful.\r\nThe bank has already been held up and our 89% of savings taken or teetering on the edge of worthlessness with the private Fed Bank printing up paper represenations of money.\r\n\r\ngun control is giving guns only to the authorities who are not "peace"ful people. Gun toting authorities often, tho not always, act as armies do [ whether national, local or international....different uniforms, same codes and training, same killer objectives given to them]. \r\n\r\nWho wants to be the only ones w\/o a way to say :\r\n"Stop !I have one legally too ! "\r\nYes Guns are Still LEGAL and useful too. \r\n\r\nare you ready to defend yourself ...your loved ones... and to keep some of what you have sweated and saved to own ?\r\n\r\nhow, by dressing up and getting into cattle cars or trains ? \r\n\r\nhow, by thinking there are no nuclear threats from many nation states and they wouldnt dare use it ? or that the radiation wont spread past it's 'borders' ?\r\n\r\never see that nonfictionized movie called "Mad Max" ?\r\nfun, huh ? no, parts were funny, not mad, but the story was a recognizable parable.\r\nLike the kind in those good books are.\r\n\r\nGUN & WEAPONS OWNERS, non criminal types, stand up and be counted before you too are counted in the cemetaries.\r\n\r\noh well....I've got mine....","author":"guns are still legal","parent_id":224945,"mime_type":"text\/plain","created":"2009-02-25 22:27:59","modified":"2009-02-25 22:27:59","fileurl":""},{"id":224976,"heading":"remember","article":"you got yours and hopfully you have lots and lots of ammo. That supply may dry up.\r\nEven after the fed declares any kind of self-defence a VERY SERIOUS FELONY like say, if you have a silencer similar to the ones snipers use or\r\nfully automatic weapons like the ones SWAT teams have or explosives like the ones that all sherrif depts have; you may wish to concider the Swiss template.\r\nHidden and ready. I mean WELL hidden and ready.\r\nBut waiting for the overwhelming force to show up to your door is bad tactics when they are devoid of action plans, hard commnication links or general mobilization. Alone yer cooked.\r\ngood luck.","author":"weapons of","parent_id":224945,"mime_type":"text\/plain","created":"2009-02-26 15:10:04","modified":"2009-02-26 15:10:04","fileurl":""}]}