Posts Tagged ‘Ph. D.’
A Look at Alan Greenspan’s Long Lost Thesis
Wednesday, April 30th, 2008
April 28, 2008 - Barron’s magazine has gotten their hands on Alan Greenspan’s Ph. D. thesis and provides analysis. The bottom line is that Greenspan long underestimated the potential effects of a popped housing bubble. Here are some excerpts:
There are only two known copies: the Maestro’s own and the one we viewed. As far as we can tell, Barron’s is the only news organization ever to have seen the thesis since a third and now missing copy was removed from the public shelves of NYU’s Bobst library at Greenspan’s request in 1987, the year that Ronald Reagan appointed him chairman of the Federal Reserve Board. Glancing at the document, we momentarily felt like Indiana Jones at the dramatic moment in which he discovers the Lost Ark of the Covenant.
We were tickled to find that the work’s introduction includes a discussion of soaring housing prices and their effect on consumer spending; it even anticipates a bursting housing bubble. Writes Greenspan: “There is no perpetual motion machine which generates an ever-rising path for the prices of homes.”
Greenspan, however, didn’t foresee a housing mania spilling into the general economy, toppling banks and brokerage houses and paralyzing key portions of the credit system. The worst he could anticipate was that a sharp “break in prices of existing homes would pull down the prices of new homes to the of construction costs or below, inducing a sharp contraction in building.” Back then, there were no home-equity lines of credit, derivatives or subprime mortgages. Mortgages were largely concentrated at savings and loans. Credit was harder to come by, too, because conventional mortgage rates were about 8.5% and headed significantly higher. Still, the thesis shows that the former Fed boss was focused on housing very early in his career. Thus, it casts doubt on his recent assertions about being surprised by the Mesozoic-era-size impact of this decade’s housing mania.
For the complete article click here: Looking At Greenspan’s Long Lost Thesis, Barron’s, April 28, 2008.
People who read this post also read these:
Tags: Alan Greenspan, Banks, Barron's, Credit, Derivatives, Economy, Excerpts, Fed, Federal Reserve, Focus, Housing Bubble, India, inflation, Markets, Monetary Policy, Mortgage, Ph. D., risk, Thesis
Posted in Credit Markets, Economy, Financials, Fixed Income, Gold, Markets, Monetary Policy, Politics, Satire, Strategy, inflation | No Comments »
Updated Twice Daily - Click to Listen