April 28, 2008
Unprotected from the Madness of Crowds
Jeremy Grantham engages in some armchair quarterbacking and fairly vicious Greenspan bashing in his latest Quarterly Letter (PDF). There are a few good bits within his rantings, including this one:
“… the two great economic setbacks of the 20th Century – the 1929-34 Depression and the rolling depression in Japan since 1989 – were both preceded by major asset bubbles and speculation. Milton Friedman and his troops can maintain that this suggested relationship between bubbles and troubles is nonsense and that all that was needed was good monetary policy. My response is that this view represents a touching faith in economic and financial theory of which tricky humans make a mockery.”
But Grantham has an even more touching faith: the Fed has the ability to move against the formation of major asset class bubbles, assuming they can accurately identify those bubbles as they form. That’s an idea that deserves to be mocked.
April 29th, 2008 at 12:30 am
Wow, and here I am currently reading Greeny’s “The Age of Turbulence” and thinking what a great guy he is. Vicious is almost an understatement.
April 29th, 2008 at 2:36 am
It’s a very good point he makes about the speaking engagement fees for GSpan, it’s really a huge signal to the next guy in line about the potential out there if you make the right friends.
April 29th, 2008 at 5:57 am
@stevegee: I’ve never understood the popular adulation of Greenspan, but I’m not in the hater camp either. At worst I think of him as a nerdy limelighter.
@Andrew: I agree about the speaking fees (and similarly think Bill Clinton has to answer a similar charge).
April 29th, 2008 at 9:23 am
Greenspan had a huge consulting practice that was very lucrative before he took the Fed job.
Grantham is brilliant, but if you look back at many of his articles over the years, he is always a bear, never bullish, but a great asset allocator and bright mind
April 29th, 2008 at 10:03 am
Jack: How huge was it? According to Grantham, everyone in the private sector considered Greenie something of a second-rater.
May 2nd, 2008 at 8:51 am
All I know is that major banks used to pay him big bucks before 1985;
Second rater? too many big instiutions used to pay him on retainer to be considered a second rater; I know a woman who worked for him who trades a lot now and she has net worth over $10 million;
he was at the Fed for sooo long that he probably plowed through much of his wealth, but he always has cute, perky Andrea Mitchell to lean back on,
May 2nd, 2008 at 9:10 am
Jack: But think how many second-raters big institutions pay on retainer? Tens of thousands?