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Wednesday, January 23, 2008

Greenspan's Bubbles

Bill FleckensteinBill Fleckenstein is the president of Fleckenstein Capital, which manages a hedge fund based in Seattle. He writes financial commentary at his Fleckensteincapital.com website and for MSN Money. He has been a long time critic of Alan Greenspan's easy money policies.

Fleckenstein has co-written a book entitled, Greenspan's Bubbles: The Age of Ignorance at the Federal Reserve, that will be published on February 11, 2008 by McGraw-Hill. The book is currently ranked #1,644 overall at Amazon and #1 in Money & Monetary Policy. He has a passionate following in the investor/financial community. His timing couldn't be better.

At Amazon.com: Bill Fleckenstein/Fredrick Sheehan - Greenspans BubblesFrom the Back Cover

“It's about time someone set the record straight! Fleckenstein chips away at Greenspan's overinflated record as Fed Chairman to reveal a legacy of lousy forecasts, poor judgment, and two huge asset bubbles. It's devastating or delicious, depending on whether you're Greenspan or the reader.”-Caroline Baum, columnist, Bloomberg News

“After reading Greenspan's Bubbles you will have no respect for the Fed! It's a must-read…in it, the authors demystify the belief that the Fed 'solves' problems when, in fact, it is directly responsible for a colossal destruction of wealth of the median household and of the U.S. currency through its irresponsible monetary policies.”-Marc Faber, editor of the Gloom, Boom & Doom Report

“Greenspan for Mt. Rushmore? Not if Bill Fleckenstein has anything to say about it.”-James Grant, editor of Grant's Interest Rate Observer

“In his typically engaging style, Bill Fleckenstein pops the Greenspan bubble…presenting compelling and convincing evidence that the former Fed chief got us into this mess...”-Herb Greenberg, Senior Columnist, MarketWatch.com
Here is one of Fleckenstein's recent MSN Money broadsides at Alan Greenspan.

Bill Fleckenstein / MSN Money:
How Greenspan's policies hurt you -- Most Americans are likely to be worse off for years to come because of the bubbles created when the former chairman ran the Federal Reserve.
"Those who cannot remember the past are condemned to repeat it." -- George Santayana, "The Life of Reason"
A debate has emerged in this country regarding the legacy Alan Greenspan has left after his nearly 19 years as chairman of the Federal Reserve. Some have argued that Greenspan ushered in an era of prosperity. Others would counter that his decisions have nearly led to the decimation of the world's largest financial system. Who is correct?

If Wall Street had a chisel, Alan Greenspan's smiling face would today be carved on Mount Rushmore. From the late 1980s until just recently, the Maestro, as an admiring journalist styled him, could seemingly do no wrong. He set interest rates -- always, so his fans insisted, the right rates. He presided over an economy that only rarely stumbled into recession or crisis. And when it did lose its way, the Greenspan Fed could be counted on to ease the pain with freshly printed dollars and low interest rates. [...]

during [Greenspan's] reign, the United States experienced a bubble in stocks and then in real estate. These two massive bubbles emerged within 10 years of each other. Prior to Greenspan's arrival at the Fed, excluding the brief mania for commodities and precious metals from late 1979 to early 1980, the country had been bubble-free for more than 50 years. [...]

Down through financial history, markets have intermittently gone to excess. Prices go to the sky and then fall through the floor. Human beings can't help themselves. But the bubbles in U.S. stocks and real estate didn't just happen. To a degree that the American public has not yet fully realized, these costly distortions were instigated and financed by the Federal Reserve -- Alan Greenspan's Federal Reserve.

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