Friday, April 28, 2006

Greenspan's legacy ... and America-bashing

Dr Greenspan's fans credit him with steering the USA (and therefore the world) through four major crises: the 1987 stock market crash, the 1994 Mexican Peso crisis, the emerging markets meltdown of 1997-1998 and the impact of 9/11 in 2001. During his tenure, there were only two mild recessions, compared with four deep ones in the previous 20 years. So there is admiration for the fact that he was able to maintain strong growth and raise living standards while keeping inflation low.

However, the critics of Dr Greenspan point to the build up of the biggest imbalances in US history: in the housing market, in consumer debt and in the current account. These underlying problems, they argue, mean that the US economy is now a house of cards that could be about to tumble. If that is true of the largest economy in the world, to what extent is that true of the rest of the world economy, now that we are all going the same way as America, thanks to the WTO?

One of the most comprehensive and articulate of Greenspan critics is Professor Ravi Batra, whose book, GREENSPAN'S FRAUD (Macmillan Palgrave, USA), accuses Greenspan of pursuing two decades of policies that have undermined the global economy, bankrupted the US social security system and left ordinary Americans worse off.

The jury is still out. The US economy is still growing strongly, unemployment and inflation are low. But the current-account deficit is at record (and, in the medium-term, unsustainable) levels, consumer debt has rocketed, savings have plummeted and the housing market is still, according to the latest figures out this week, going through the roof.

Pray that the day of judgement will be put off.

What is bad for the US economy is also bad for the rest of the world. That is why America-bashers need to be careful about when and how they bash America.

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