Chicken Smith View:
If you’ve seen Alan Greenspan’s recent peddling of his book in the media, you might think he’s an articulate fellow. However, the truth is he always had a convoluted way of saying things that left you either confused or thinking he agreed with you. This was dubbed “Fed Speak.” Even after leaving his post as Fed Chief, he still hasn’t changed his ways. Following are some recent quotes from Greenspan and what the average person might think of it, followed by what I think of it.
According to Bloomberg on November 18th: Former Federal Reserve Chairman Alan Greenspan said the dollar’s decline hasn’t affected the global economy and is a “market phenomenon.”
The Average Person Might Think: …Wow! Our dollar is doing phenomenally well. I’ll go shop for some more stuff made in China now.
Chicken Smith View: …what a bunch of crock! Define “market phenomenon.” Even the Great Depression can be classified as a “market phenomenon”.
And notice how Greenspan carefully crafts his sound bites with escape clauses and conditional statements…
Greenspan: “…dollar’s decline hasn’t affected the global economy…”
The Average Person Might Think: …oh, ok, so everything is fine with our economy. I mean the US is part of the global economy right?
Chicken Smith View: …the global economy is fine, but the American economy, taken on its own, is not fine.
Greenspan: the U.S. economy is “doing reasonably well”
The Average Person Might Think: …yeah, we’re doing reasonably well! My stocks are higher than last year, isn’t that all that matters?
Chicken Smith View: …considering how bad things will get later, we’re doing just fine. By the way, don’t forget to calculate inflation when valuing your stock earnings. Here’s a hint; it’s not 2%.
Greenspan: “So long as the dollar weakness does not create inflation”
The Average Person Might Think: …see, as long as there’s no inflation we’re ok. And the Fed says there’s no inflation, so we must be ok.
Chicken Smith View: …yeah, and I have brunch with Elvis & Lincoln every Sunday morning. Is he nuts? How can the dollar weakness not create inflation?
Greenspan: “If we can get beyond this housing problem I think we’ll do pretty well”
The Average Person Might Think: …it’s just a housing problem …everything else is actually doing pretty well. I mean, my stocks are up, right?
Chicken Smith View: …as soon as someone invents a time-machine, we’ll just skip over the forthcoming depression. Or not. Because we can’t just get beyond this housing problem, it’s a major part of this mess. So I guess that means we won’t do “pretty well”, huh Mr. ex-Fed Chief? BTW, isn’t the stock market a lagging indicator?
Read between the lines!!! A great economy does not need conditional statements like Greenspan is making. If the economy is doing well, it’s just that. You don’t need to preface it by saying it’s doing “reasonably well.” A great economy does not need “if this” or “so long as that” to quantify its position.
Greenspan is trying his hardest to sugar-coat the messes he made between 2001 and 2003. However, he’s actually telling some truth, it’s just not what you think you’re hearing. The truth is there’s an economic recession on its way that can turn into a depression if people (although mostly banks, corporations, and politicians) don’t wake up and stop begging the Fed to continue lowering interest rates to bail out certain sectors of the economy or groups of people.
People should request that their congressmen and senators express their constituency’s demands that the Fed not continue using stall tactics (ie, lowering interest rates) to delay an inevitable recession. It will only delay the problem thereby assuring an even bigger recession and/or depression.