And what a piece of work too...
WE ARE studying the life and times of former Fed chief Alan Greenspan, writes Bill Bonner in his Diary of a Rogue Economist.
Not that we expect to discover anything new. We were more or less awake and alert during his entire public career; there is little that isn't known about the man and his times already.
"The best-known public official since Pontius Pilate" is how we described him in one of our books.
But it's helpful to go back over the story, the flow of history...and the large role he played. Maybe we can learn something.
Mr.Greenspan was – at least on the surface – one of the most influential people of the late 20th and early 21st centuries. He was the top man at the Fed from 1987 to 2006.
The demon door swung open on his watch at the Fed. Thenceforth, America's central bank would no longer stay in its place, guarding price stability and ensuring full employment. It would ensure a rising stock market, too.
And yet, wouldn't the door have opened without him?
Tomorrow, we're writing about Sebastian Mallaby's new biography of Greenspan, The Man Who Knew, for lifetime subscribers of our monthly publication The Bill Bonner Letter.
The man who knew? Greenspan didn't seem to know that the biggest bubble in history was created right under his nose. Nor did he seem to notice that the post-1971 fake-money system had created the very distortions and perversities he had warned about as early as 1966.
On the book jacket, Mallaby attempts to explain the title. He suggests that the financial crisis of 2008 was not Greenspan's fault. Apparently, he knew the financial system was threatened by a sharp and painful correction.
If so, why didn't he say something?
Even we knew a bubble had formed. And we said so. We warned readers so often, they got tired of hearing it.
As an important aside, once again we are issuing tiresome warnings. Debt levels are now higher than ever. Total world debt now stands at $217 trillion – or 325% of global GDP.
Meanwhile, US government debt, as officially measured, is closing in on the $20 trillion mark. And last year alone, the Fed added debt equal to more than $12,000 per US household.
It did this, by the way, while household incomes barely rose at all. Were last year's national debt increase equally distributed among American households, the typical family would have lost an amount equal to two-and-a-half months' pay.
Of course, we can't predict the future any better today than we could 10 years ago. Besides, this is a free service; what do you expect?
But as an act of courtesy, even a total stranger should tell you if he sees your hair is on fire.
So watch out, because stocks are near all-time highs, too.
Wall Street prices no longer reflect a solid and sober assessment of a company's earning potential. Instead, they're based on insider manipulations (companies have been borrowing heavily to buy back their own stock)...or gambles (investors bet that Trump's tax and regulatory cuts will mean higher earnings).
Don't wait for a warning from Madame Yellen; you won't get it. She sees no bubble. In 1996, Mr.Greenspan famously had no trouble spotting "irrational exuberance." But by 2006, he wore dark glasses and carried a white cane.
"Bubble? I don't see any bubble," he claimed.
(We're going to meet with Mr.Greenspan next week. He's coming to Baltimore to meet with a group of our analysts from around the world. We'll ask him what happened to his eyesight. Watch this space...)
"He was blinded by ambition," you might say.
Maybe. But maybe what really happened was that he was never a man who made history. Instead, he was bent by it.
As regular readers will be aware, the world's money system changed in 1971 when President Nixon ended the ability of foreign nations to convert their Dollars to gold at a fixed price.
A few economists – including Alan Greenspan – opposed the move. They said, correctly, that it would lead to imbalances, confusion, and uncertainty.
But within a short time, almost everyone accepted the new, purely paper currency as a worthy successor to the old Bretton Woods-era gold-backed Dollar.
It became an iron orthodoxy, taught in every economics department and repeated at every professional gathering: The world economic system was too large and too complex to ever return to the gold standard, they said.
The economy boomed. Worries were forgotten. Reagan brought morning to America again. Clinton brought Monica Lewinsky to the Oval Office. George W. Bush brought mayhem to the Middle East. Who noticed that the new money was doing its damage...distorting and perverting the entire world economy?
But with stock market prices rising, who had a reason to say so?