Subba’s Serendipitous moments

February 23, 2009

The Greenspan shift

Filed under: Business,Perspective — Subbaraman Iyer @ 2:07 am
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What goes through the mind to change one’s ideology — from a high priest of free market and laisser-faire capitalism to becoming an advocate of nationalism?

I wonder about Alan Greenspan’s — the former Fed Chairman recent recommendation of nationalising US banks on a temporary basis.

Is it the extent of  crisis when this whole thing started unfolding under his watch and that there’s no other option left but to nationalise some of the banks?

Or was he truly ‘shocked’ that markets didn’t work as he said in the Congress testimony a few backs back? His exchange with the Congress representative is crisp, clear and honest:

Referring to his free-market ideology, Mr. Greenspan added: “I have found a flaw. I don’t know how significant or permanent it is. But I have been very distressed by that fact.”

Mr. Waxman pressed the former Fed chair to clarify his words. “In other words, you found that your view of the world, your ideology, was not right, it was not working,” Mr. Waxman said.

“Absolutely, precisely,” Mr. Greenspan replied. “You know, that’s precisely the reason I was shocked, because I have been going for 40 years or more with very considerable evidence that it was working exceptionally well.”

Initially I wondered whether he was being naive about Wall Street being self-regulating, that it was in the interest of the financial world to protect the consumer and the shareholder’s equity.

However, later, I think it is the hallmark of a truly wise person to admit one’s limitations and endorse the right solution for the problem. It only means that he is not a prisoner of his own view. Standing up and owning an error in front of Congress is not easy. He is the only person who has admitted some culpability. No CEO in Wall Street or anyone in the Government have done so.

One should also not ignore that Alan Greenspan steered the US economy though one of its largest booms in history.

The common view is that people tend to be stubborn as one age. It takes a rare mind to abandon what you have believed in all your life.

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  1. What did I tell you about nationaization, last month? It will be sooner or later, and when an AynRand talks about nationalization you know things have changed here.

    Comment by econjournal — February 25, 2009 @ 9:56 am | Reply

  2. […] after Alan Greenspan’s admission of shock that markets didn’t work, it only goes to show the ultimate measure of one’s […]

    Pingback by Warren Buffet– An enlightened sage. « Subba’s Serendipitous moments — March 2, 2009 @ 12:52 am | Reply

  3. […] after Alan Greenspan’s admission of shock that markets didn’t work, it only goes to show the ultimate measure of one’s […]

    Pingback by Warren Buffet-- An enlightened sage! | Expanding Thought — March 14, 2011 @ 11:24 am | Reply

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