Note to Paul: What really destroyed Rubin and Greenspan was the fact that they didn't understand business cycle theory, and neither do you. In his well worth reading autobiography, The Age of TurbulenceTen years ago the cover of Time magazine featured Robert Rubin, then Treasury secretary, Alan Greenspan, then chairman of the Federal Reserve, and Lawrence Summers, then deputy Treasury secretary. Time dubbed the three “the committee to save the world,” crediting them with leading the global financial system through a crisis that seemed terrifying at the time, although it was a small blip compared with what we’re going through now...Never mind the fact that two members of the committee have since succumbed to the magazine cover curse, the plunge in reputation that so often follows lionization in the media
, Greenspan spends nearly the entire book discussing his analytical methods, but barely mentions the business cycle.
He's not afraid to mention it in his FT op-ed today, the whole premise of which is that equities will lead the recovery:
ReplyDelete"Stock prices are governed through most of the business cycle by profit expectations and economic activity. They appear, however, to become increasingly independent of that activity at turning points. It is this property that makes them a leading indicator, which is the conclusion of most business cycle analysts."
Yeah, but he has the cause wrong. It is not market expectations, it is Federal Reserve money that is pumping this baby.
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