Greenspan Shrugged

This past week Alan Greenspan made a shocking admission. He admitted that a cornerstone of his economic faith, namely the belief that unfettered, laissez-faire capitalism may NOT be a net good to society. This admission by the high priest of monetarism, the "money changers, money changer" is on the magnitude of the Catholic Church changing its position on gay marriage or abortion.

Greenspan finally admitted to something that he had been incessantly warned against during the 90s, namely that carte-blanche deregulation would cause the individuals that particiapte to get greedy and do risky things in the short run that would eventually threaten the viability of the system in the long run.

But should we believe him?

This is a man who suckled at the teat of Ayn Rand. He was part of her inner circle and was so close to her that he was privy to proofs of Atlas Shrugged before it was published. One would think that any follower of Ayn Rand, the same woman who found virtue in selfishness and weakness in altruism, would (if they were true believers) be able to predict that individual hubris would triumph over the needs of the community on the whole.

Therefore when Alan Greenspan admitted under questioning by Rep Henry Waxman (D-California) this week that he was shocked that the bankers selling risky derivatives would throw it all away just for their own personal enrichment I actually think he revealed a lot more than just this late in life epiphany.

If he was not lying to Rep Waxman, then I think it revealed that he never really understood the philosophy espoused by his mentor or thought through its consequences.

Perhaps the venerable oracle of the Fed Reserve was not as sagacious as his demeanour implied.