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The Real Greenspan

January 11, 2014 in Economics

By Per Bylund

225px-Greenspan,_Alan_(Whitehouse)

In a recent not-an-interview on Harvard Business Review‘s HBR Blog Network, Alan Greenspan reveals his true self as a central banker and student of ”economics.” One might think that the former Collective member would understand and appreciate the workings of the market, but if there ever truly was a Greenspan like that he’s long gone.

The Greenspan that emerges in this text is a man who romanticizes about economic planning, who believes in his ability to rationally plan and thereby ”save” the market (from itself). It is possible that the author’s anti-market bias shines through in the text’s “heavily edited excerpts,” but the Greenspan that is portrayed is the typical megalomaniacal central banker. And he obviously approaches the study of economics from a purely statistical, quantitative, and inductive point of view.

To illustrate, at the beginning of the “interview” Greenspan expresses his real disappointment about not being able to get down to [statistical] business:

I had an idea of constructing a certain statistical procedure. I called in a bunch of the senior analysts and I say this is what I have in mind. They all said, “Oh, it’s a terrific idea. Let’s do it.”

I said, “I’m going to do this one.” Silence. One guy says, “You’re CEO. You’re a chairman. You do CEO/chairman stuff. We do the research here.” I mean, I was really put down.

Poor Greenspan had the power to rule them (us) all, but was not expected to do “real” economics: fiddle with the statistical models used in controlling the economy.

The “interview” is unsurprisingly littered with talk about looking at the ”data,” as well as phenomena that Greenspan seems to think appear spontaneously. Bubbles, it is suggested in the text, have no obvious cause, but Greenspan, in all his divine experience, has come up with a novel (?) idea: bubbles seem to be preceded by “good central bank performance” (!) and hence by “a prolonged period of economic stability, stable prices, and therefore low risk spreads, credit-risk spreads.” I guess that’s one way of putting it, and staring at the data won’t ever get us closer to the truth than “there seems to be a correlation here.” (Even Paul Krugman knows better.)

This “interesting theory” (according to the author of the article) is obviously not interesting enough to spend time talking about, because the “interview” rushes on to discuss the real problem for the central bank. In Greenspan’s words, “the question is, do you quash the bubbles?” Right, when …read more

Source: MISES INSTITUTE

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The Mises View: The Latest Employment Numbers

January 11, 2014 in Economics

By Mises Updates

Mark Thornton explains what the latest government employment report really tells us.

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Source: MISES INSTITUTE

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Biographer, Scholar, Friend: Mary Sennholz at 100

January 11, 2014 in Economics

By Mises Updates

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Jeffrey Herbener and Shawn Ritenour write in this weekend’s Mises Daily:

One of her duties at FEE was to organize the seminars in which Ludwig von Mises and other luminaries would speak. In her work, she rubbed shoulders with Frank Chodorov, Baldy Harper, Henry Hazlitt, Israel Kirzner, Edmund Opitz, Gary North, Benjamin Rogge, and Murray Rothbard among others. The only unpleasant encounter she mentions in the interview was with Milton Friedman.

Like Read, however, Mises was more than a casual acquaintance. She faithfully attended his NYU seminar with her friend Bettina Bien. The fruits of the seminar were not merely intellectual for Mary. It was there that she became acquainted with her future husband. Margit von Mises played matchmaker for Leonard Read’s assistant and her husband’s Ph.D. student. What began as a contractual relationship, Miss Homan editing the manuscript that would become Dr. Sennholz’s dissertation, blossomed into a beautiful partnership.

The friendship between the Mises’s and the Sennholz’s lasted a lifetime. Margit became a devoted godmother to Mary and Hans’s son, Robert. The couples traveled together to Guatemala and Mexico. As Mary tells it, the calm, cerebral Lu found his complement on the lecture circuit in the passionate, inspiring Hans. Margit and Lu visited Grove City several times over the years. The most memorable was in June of 1957 when Hans arranged for Grove City College to award Mises an honorary doctorate degree at commencement. Hans and Mary hosted a post-commencement reception for Mises at their home.

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Source: MISES INSTITUTE

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New Fed Chair Starts With– What Else?–A Forecast

January 11, 2014 in Economics

By Hunter Lewis

Janet_yellen_swearing_in_2010

Janet Yellen celebrated her confirmation as Fed Chairman on January 6 by immediately issuing a carefully hedged prediction: “I am hopeful that the first digit [ of GDP growth] could be 3 rather than 2… and  [that] inflation will move back toward our longer-run goal of 2%.”

Let’s hope she has better luck with her predictions than the retiring Ben Bernanke, who almost always got his wrong.

In 2006, at the zenith of the housing bubble, he told Congress that house prices would continue to rise. In 2007, he testified that failing subprime mortgages would not threaten the economy.

In January 2008, at a luncheon, he told his audience there was no recession on the horizon. As late as July 2008, he insisted that mortgage giants Fannie Mae and Freddie Mac, already teetering on the verge of collapse, were “ adequately capitalized [and] in no danger of failing.”

Following the Crash of 2008, Bernanke’s prognostications did not much improve. Nor did Yellen’s, who had also misjudged the housing bubble, and who became Fed vice chairman in 2010.

The two of them got the “recovery” they predicted, but the weakest “recovery” in history. Real income for the average American fell during the recession, but then fell even more after its supposed end, and now hovers at a level last seen in 1989.

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Source: MISES INSTITUTE