Monday, November 05, 2007

A Quick Note to Mr. Greenspan

Dear Mr. Greenspan,

I would just like to write and thank you for some of what you managed to accomplish during your tenure at the head of the Federal Reserve. I've heard that a whole lot of people used to care what you had to say. Unfortunately, I'm pretty sure that most of them didn't really understand what you were doing. It's okay, all of my praise is sincere and related in the utmost to things that I really do understand.

1. Thank you for the housing bubble. Without the housing bubble, most of the people I know in Miami wouldn't have had the opportunity to borrow huge amounts of money against an aging structure and use it to take fancy trips and buy Hummers. This brief period allowed many people with lagging self esteems to delude themselves into thinking that they were rich. Some even believed that they possessed some kind of superior economic savvy due to their brilliant real estate investments. Yeah, so now foreclosures are at an all time high, and some of those buildings down by the beach are 50% empty, but it was all worth those 5 years of delusional glory.
Now, between the two of us, we both know that any time you drop the interest rate that banks borrow at to 1%, that there is going to be a run on money. We know that banks want to lend this money out to any takers and that it found its way into the housing market. We both know that this is fake money, and that it is all coming off of the printing press with absolutely no justification in the real economy. It's okay though, what could possibly be the harm in reproducing large amounts of the world's most powerful currency with no justification? Well, I guess that brings me to #2.

2. Thank you for the inflation. I was personally getting tired of being able to buy soda for under $1, a house for under $200,000, or a meal for $5. This made me feel poor. I feel much better now. We can all complain about the rising cost of EVERYTHING (This includes healthcare, oil, education, food, milk, travel, shelter, etc...). Between the two of us, I know that rising prices amongst all goods is probably a reflection of diminishing value of the currency, rather than mythical price hikes in every sector. The fact that we've been printing about 8% of our money supply in a year makes this more likely. It's okay, we'll keep it to ourselves.
One thing however. I'm as big a fan of Canada as anyone else. I've got good Canadian friends. I've visited and enjoyed my stay in the past. However, did you HAVE to devalue the US dollar below the Canadian dollar. I seem to recall buying Canadian dollars for about $0.70 10 years ago. My friends from the country haven't said anything about a great Canadian economic boom, so I suspect that the 40% increase the value of the Canadian dollar is really more of a 30% decrease in the value of the greenback.

3. Even though it's not really your fault, I'd also like to thank you for continuing the central banking-capitalism association. We both know that central banking and free market capitalism are antithetical to each other. However, you've kept the two so tied together in the minds of the average person, that they actually blame the free market for the failures of your central economic control schemes. They blame the market for your boom-bust cycles. They blame capitalism for you making the rich richer by giving them first access to the fake money you print, which gives them the option to purchase resources at lower prices before inflation takes hold. I've got to pat you on the back for this one. You've got them all fooled.
We'll add your association in with all modern oxymoron double speak. The free market is now central economic control by one bank. It fits in with how racism is now a failure to discriminate based on race or how charity is now being forced to give against one's will. It's not purely your victory Mr. Greenspan, but I'll give it to you.

4. You've got great timing. You gave the entire Federal reserve over to Mr. Bernanke right before the housing bubble that you helped create started to deflate. Now we'll all blame him. That sure is brilliant. I don't like getting blamed for things that are my fault either. I notice that he's cutting interest rates too. That's great. He'll continue all of the great policies that got us to where we are now in the first place. I don't really like leaving the country anyway, so I'll never need foreign currency. Besides, I'm sure the rest of the world will just take an ever devaluing dollar forever.

I have so much more to say, but I just have so little time. Feel free to write back.

All the best,



Anonymous Anonymous said...

I absolutely agree. This country's economy is a house of cards and Greenspan set it up.

Inflation is way higher than what the government reports. Why do I say that? Because the government has steadily been removing components of the inflation index. They recently took out energy costs. Energy costs really don't have much impact anyway right?

This country has no stomach for short term economic pain and this is eventually going to results in a very big long-term pain.

8:57 AM  
Blogger MiamiMed said...

Absolutely. I was going to write about inflation indeces, but that would have gotten a bit longwinded.

Thanks for writing.

1:27 PM  
Blogger Brian said...

Geez, you're a little grumpy today. It's not that bad... just think of all the renters, and the college grads that financed there way through on historic low rates... not to mention the expanding economy over the past 5 years because of what measures were taken. Most of the time you just can't fix everything.

11:14 PM  
Blogger MiamiMed said...


I never said we should fix anything. I don't believe in central economic planning. The time will come to pay the piper. A lot of people borrowing money at artifically low rates has produced a negative savings rate, an economy based on borrowing that cannot continue into perpetuity, severe devaluing of the US dollar, and inflation. Essentially, you borrowed a lot of money to pay rising tuition prices caused by inflation, but you got it at a lower rate. You're actually worse off.

7:02 PM  
Blogger Petri said...

I heard Stafford loan interest rates might be coming down to 3.4%. Not sure how they are able to afford it but if true, it sure helps me out.

5:55 PM  
Blogger Medical Mencken said...

Right on the money with your indict of the fed. I trust you've heard that Presidential candidate Ron Paul wants to abolish the federal reserve if elected and return to a gold standard?

3:12 AM  
Blogger Biscuit799 said...

Inflation is generally reported without energy or agriculture prices because both of those prices are so volatile.

I'm pissed about the sub-prime bailouts, personally. Hey, you went out and made a bunch of shady loans to people you knew wouldn't be able to pay them back once interest rates went back up, but whatever, here, the taxpayers will help you out!

11:07 PM  
Blogger MiamiMed said...

I agree, the subprime bailouts are pure BS. For capitalism to work, you have to pay the consequences of your actions. You keep the rewards, and you pay the price. Capitalizing profits while socializing costs is not a sound economic policy.

2:52 PM  
Blogger Ryan said...

To be fair, nGDP/cap has seen some pretty consistent growth over Al's tenure...

3:03 PM  
Blogger MiamiMed said...

This is misleading though. GDP is calculated using the same dollar that is being inflated. Printing more money will almost always raise GDP, because more dollars will be in the economy. If you attempted to calculate GDP in Euros, it would be disappointing.

3:26 PM  
Blogger Mr said...

If your undergrad was on loan, you should be genuinely grateful for the inflation. You see, if you borrow money, and then money is suddenly devalued, then you suddenly owe the bank quite a bit less than you would have, effectively!

Yes, I know why this is actually a bad thing in the grand scheme, and I agree with you. But I try to look on the bright side. ^_^

An MSI at USF.

4:39 PM  

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