Greenspan: US Needs Home Inventories Cut
The Associated Press Tuesday, November 6, 2007; 8:15 AM
TOKYO -- Former U.S. Federal Reserve Chairman Alan Greenspan said Tuesday that cutting excess home inventories in the United States is key to stabilize the financial system at home and the rest of the world.
"The critical issue on the whole subprime, and by extension, the international financial system rests very narrowly on getting rid of probably 200,000-300,000 excess units in inventory," Greenspan told a business leaders' forum video conference in Tokyo from Washington.
The former Fed chairman urged central banks to avoid suppressing asset bubbles, which is "exceptionally difficult" to do.
________________________________________________________________ Alan, whose advice has been uniformly bad during his last term as Fed Chairman, wants no suppression of bubbles on the one hand and (by inference) a managed way to get rid of 'units'--houses, in less contrived jargon. Admittedly, Greenspan was never a practiced hand at suppressing asset bubbles, having missed that opportunity twice--first at the Munich of Dotcoms and later during the Potsdam of Sub-prime. Was there ever a greed so obvious, so onerously contrived by those who would victimize the poor as sub-prime? Even the adjective (sub-prime) modifying the noun (mortgage) has an evil ring to it. Were Greenspan willing to let the financial markets take the bath they deserve to steam themselves in, all might have a chance of righting itself. But he is trying to stabilize--read that protect the financiers who got caught between the fist-base of greed and the pay-back at second--sliding in with their ethical pants down around their ankles. It won't work, this extinguishing the small fires that keep the international markets honest. It will instead create an underbrush of protectionism, setting up a roaring market retribution, a firestorm bringing a decades long and much needed burn at uncountable cost. The pain will make October 1929 look like a paper-chase. Plague was, for centuries, the equalizer of population densities--the paring back of human activity. Plague is not limited to human health issues. It has a place in the history of financial imbalances. In recent decades, we invented financial mechanisms no one really understood, then profited, stacking away unconscionable wealth for an OZ-like minority. First the Dotcom bubble. Then the Sub-prime bubble. Now the Hedge Fund bubble, which Greenspan fails to see as well.