July 18th, 2016 – Article previously published in the blog “US and emerging markets “CincoDías.com
Faced with popular belief, economic forecasting can be an accurate, always transcends science and when not more than 5 to 10 years. In this, there is consensus among economists who foresee a global economic slowdown: Ruchir Sharma ( “The rise and fall of nations, 2016), the investor Mohamed A. El-Erian (The only game in town, 2016), Rana Foroohar ( Makers and Takers, 2016), Strees Test (Tim Geithner, 2015), Mervyn King (the end of alchemy, 2016), and former presidents of the Federal reserve BVen Bernanke (the courage to act) and Alan Greenspan, whose work discussed then.
Alan Greenspan: The Age of Turbulence “: sixty years of economic history
When Alan Greenspan published his second memoir ( “Alan Greenspan: The Age of Turbulence”), he had not yet broken out the financial storm, nor the credit crunch, nor the ensuing economic crisis. Capitalism was in “full swing” butt, reverberant, triumphant, without an alternative economic model that will make competition. World gross domestic product soared, employment growth, runaway, and financial markets, working effectively. It is in this context that Greenspan decided to condense, in a large volume, sixty years of experience in the economic world.
A Greenspan is known especially for his nearly 20 years as President of the Federal Reserve of the United States. As he himself admits, from that position, he had access to privileged information, in addition to being able to consult many different sources. For a voracious economist of data, that’s a smorgasbord, a delicacy, arouses a healthy tremendous envy. But the “economic” Greenspan story begins much earlier. His experiences as an analyst and as a business consultant. It is reliable information provider, data. He shows what is: macro economic variables, prediction models and anticipation, explains what will happen to the economy or specific sectors of economic activity. But others make the decisions. For forty years, Greenspan is data provider. This is essential to correctly understand their role in the Federal Reserve and its mental process in making decisions.
For me, this is more important than their knowledge of the presidents and international leaders who tried. For Greenspan, it is the psychology that leads to economic crises: if there is panic among the general population, people stop eating and therefore stop producing companies. The consequence is clear: the economy is stopped. I am struck by the sincere way things Greenspan explains: “before I bring economic statistics, I always requested questionnaires to determine the confidence of consumers.” Every good economist handles “hard data” (macro variables) and “soft dat`” (consumer confidence index). He invented the category, as they say, and ended up handling it masterfully. Yesterday (21 November 2009), working with the Research Department of La Caixa, I could see the same (wise) philosophy.
A second lesson learned by the author and conveys to readers: humans are insatiable, always want more. When we get a certain standard of living, economic, almost automatically welfare, take it for granted and we move on to something else already achieved that goal, now I want more. We do not refund the conquered land. We crave more comfort, more money, better life, better vacation. Greenspan believes that the free market economy, capitalism, are the best ways to provide citizens these “goodies”.
But it was Greenspan was the hand deregulated markets and gave too much leeway to American investment banks. It allowed to invest through Internet without control, without limits, with excess information not verified. Foreign financial products were marketed without anyone having given approval, or studied its potential risk. A year after his book published (by The Penguin Press, 2007), the average world press-and demanded accountability for the economic crisis. Newsweek published his photo on the cover and the headline read: “Blame it on him!” Or “Cúlpele him!”.
Greenspan has acknowledged that, having been carried away by the enthusiasm of the triumph of capitalism, let his guard down, let them do and was guilty of giving too much freedom to the “invisible hand” of Adam Smith. He has published a new edition of his book with a chapter devoted to the crisis, toning your particular mea culpa.
However, none of this, fogs, for me, the great contribution of his book that, like all the ones I like, I read twice: sixty years of American and world economic history condensed into a book.
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