Democracy for Vancouver

when his time comes, Alan Greenspan would fall directly from his lofty platonic perch down to the deepest circle of hell, where he would live in a flooded New Orleans shotgun with Ayn Rand and Milton Friedman, each given only a tablespoon to bail with while fetid water continued to seep through the walls, rank with the stench of forgotten corpses and slick with a toxic stew of petroleum derivatives.

But even that punishment might be insufficient for Greenspan to recognize that there are actual people suffering under the burdens of his laissez faire capitalism:

“It’s very critical that this thing reach a selling climax — if I may put it in other words, exhaust itself,” Greenspan said. “It’s only when the markets are perceived to have exhausted themselves on the downside that they turn. Trying to prevent them from going down just merely prolongs the agony.”

Why is this bastard is still on the teevee when it was his enthusiasm for “innovative loan products” that helped build this Big Shitpile*? Let’s take a trip down memory lane with the guru, shall we?

April 17, 2002: “The ongoing strength in the housing market has raised concerns about the possible emergence of a bubble in home prices. However, the analogy often made to the building and bursting of a stock price bubble is imperfect. . . Even if a bubble were to develop in a local market, it would not necessarily have implications for the nation as a whole. …[B]ecause the turnover of homes is so much smaller than that of stocks and because the underlying demand for living space tends to be revised very gradually, the speed and magnitude of price rises and declines often observed in markets for securities are more difficult to create in markets for homes. ”

November 13, 2002: “[I]t is important to recognize that the extraction of equity from homes has been a significant support to consumption during a period when other asset prices were declining sharply. Were it not for this phenomenon, economic activity would have been notably weaker in the wake of the decline in the value of household financial assets.”

February 11, 2003: “Moreover, owing to continued large gains in residential real estate values, equity in homes has continued to rise despite sizable debt-financed extractions. Adding in the fixed costs associated with other financial obligations, such as rental payments of tenants, consumer installment credit, and auto leases, the total servicing costs faced by households relative to their incomes are below previous peaks and do not appear to be a significant cause for concern at this time.”

July 15, 2003: “”[H]istorically low mortgage interest rates have helped to propel a solid advance in the value of the owner-occupied housing stock. . . We expect both equity extraction and lower debt service to continue to provide support for household spending in the period ahead…”

February 16, 2005: “The rapid rise in home prices over the past several years has provided households with considerable capital gains. . . [F]rom the perspective of an individual household, cash realized from capital gains has the same spending power as cash from any other source.”

June 9, 2005: “Although a ‘bubble’ in home prices for the nation as a whole does not appear likely, there do appear to be, at a minimum, signs of froth in some local markets where home prices seem to have risen to unsustainable levels.”

July 20, 2005: “The increase in the prevalence of interest-only loans and the introduction of more-exotic forms of adjustable-rate mortgages are developments of particular concern. … some households may be employing these instruments to purchase homes that would otherwise be unaffordable.”

August 25, 2005: “History has not dealt kindly with the aftermath of protracted periods of low risk premiums… What [homeowners] perceive as newly abundant liquidity can readily disappear. Whether the current elevated level of wealth-to-income ratio will be sustained in the longer run remains to be seen.”

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A little slow on the uptake, our buddy Alan. For further proof, here’s Greenspan on the chances of a U.S. recession, yesterday:

“The probabilities of a recession have moved up to close to 50 percent — whether it’s above or below is really extraordinarily difficult to tell,” Greenspan said.

And here is Greenspan 5 weeks ago:

On Nov. 7, he told a conference in Sao Paolo that the chances of a recession were “less than 50-50.”

And here is me, in April 2006:

Add to [the housing bubble] the “stings” of a concurrent slowdown in construction, high oil prices, the cost of the war, and the continuous purge of skilled, decent wage jobs out of the U.S., though - it’s a recipe for recession.

It’s not that I’m so smart (I got a D+ in high school pre-calculus, and I think the teacher just gave me the “+” for effort); but, if I can outguess Greenspan by 1½ years, why is anyone still listening to him?

[emphasis added.]

*as Atrios calls it.