Yeah, Like That

Congressmen are generally very generous in providing support for a basic EOP position: that while it's possible, even obligatory, for thoughtful folks to vote against a candidate, a vote for anyone running for political office is, at best, a sad compromise with one's principles.

Anyway, apropos of the Asset Bubble thing below, this by the Honorable Senator Jim Bunning, R-KY on Alan Greenspan:

During his tenure at the Alan Greenspan has done an admirable job. However, he has always erred on the side of raising rates. I am not alone in this opinion. History is showing that he made mistakes in raising rates for too long.

I don't agree, but it's certainly an arguable position. But not if you also want to point out:

Yes, Chairman Greenspan's tenure held relatively low inflation with a growing economy. But his record on the economy came about from the creation of a record market bubble that ultimately popped. Then there was a housing bubble. It led to an unbalanced recovery fueled by soaring housing costs that resulted in record household debt.

Right. Sound position (see The Economist), although again not necessarily correct. But this implies that rates were not raised quickly or substantially enough to prevent the formation of the bubbles, or early enough to let air out without a painful correction in valuation.

And the contradiction illustrates the difficulty Greenspan would have had in responding to Problem B when he was already getting complaints about Problem A. And his attempts to jawbone the bubbles down with quite accurate remarks about "irrational exuberance" and "frothy" markets? Well, Herr Bunning
also states:

Aside from being addicted to rate increases, another one of my qualms with Chairman Greenspan was that he talked about everything under the sun - from trade deficits to budget deficits, tax policy to fiscal policy, and even the nation's oil patch.

For dinner conversation, these would be fine topics to discuss. But the Fed's jurisdiction is supposed to be purely monetary policy. Hopefully, his successor, Ben Bernanke, will be a different kind of chairman in these respects. He should stick to monetary policy and not interfere with fiscal issues, which rattle markets and get the bulls and bears into a tizzy.

So, not talking about asset bubbles. And, most of all what really hurts is when Greenspan points out that a profligate fiscal policy (set by Senator Bunning and his colleagues) constrains the Fed's monetary policy options, especially in regards to lowering those nasty high rates without re-igniting inflation. Pointing out further that such fiscal policy immediately prior to the beginnings of exploding entitlements due to demographics and the cost of medical technology within medical access Americans are willing to accept will make monetary policy even more problematic in the future: well, I think that's just being a Fed Chairman. Anyway, QED political constraints at the Fed. It also puts a sock in my mouth regarding my usual complaint about Greenspan - that he should have been screaming bloody murder at the deficits.

Oh, and this is also the Senate, which delayed the expensing of stock options (e.g. a more accurate although not perfect accounting procedure) by threatening to hamstring the SEC.

My position: the idolatry of Chairman Greenspan is overdone. He had limited tools and hence limited decisions to make; his was the strongest voice on the Fed, but there was strong consensus among the Governors. He neither created nor specifically encouraged the tech advances (and corporate bloodletting) that gave America productivity gains it hadn't experienced in several decades. But, like a good physician, first he did no (or little) harm.