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Bells ringing for silver ETF despite opposition of silver users'' group
By Froma Harrop
Providence Journal, Rhode Island
Wednesday, January 25, 2006
http://www.projo.com/opinion/columnists/content/projo_20060125_25harr
.1289ec71.html
Alan Greenspan may be "the greatest central banker who ever lived,"
two Princeton economists asserted last year. Worship at the Church
of Greenspan had reached such a feverish pitch that when Senate
Minority Leader Harry Reid called the Federal Reserve chairman "one
of the biggest political hacks" in Washington, even fellow Democrats
shushed him.
It now appears that Reid has lots of company. Top economic minds are
saying that Greenspan was not a great central banker -- or even a
good one. He was an enabler of the reckless Bush deficits. And their
economic policy was designed to serve the appetites of adults living
for today, and let the next generation be damned.
The cover of The Economist magazine has a cartoon of Greenspan
handing the next Fed chairman a lit dynamite stick representing the
economy. Greenspan's legacy, the magazine says, will be "the biggest
economic imbalances in American history."
Paul Volcker, who preceded Greenspan as Federal Reserve chairman,
says there is now a 75-percent chance that America's two monster
deficits -- the budget and trade deficits -- could "wreck the
international financial system" in the next few years.
While not a great banker, Greenspan was definitely a great
Republican. He will be remembered for encouraging Democrats to
dispense the harsh medicine needed to deal with budget deficits,
then helping Republicans fill the punch bowl.
In 1993, Greenspan was all for the tax increases in Clinton's
deficit-reduction budget proposal. The plan, which passed without
one Republican vote, signaled to the financial markets that America
was serious about taming deficits. Thanks to a booming economy and
new tax revenues, Clinton left the White House with a federal-budget
surplus of $127 billion -- and projected surpluses of over $5
trillion.
Come 2001, Republican George Bush is in office, and Greenspan is
giving the nod to steep tax cuts. The surpluses vanish, and deficits
metastasize. The federal-budget deficit this year is expected to top
$400 billion. (The Bush people, who insisted that the projected
Clinton surpluses were never real, nonetheless used them to justify
their tax cuts.)
Greenspan started expressing concern over the mounting budget
deficits, but never fully disavowed the tax cuts. Last year, he said
he'd prefer to leave the tax cuts in place and instead reduce
Medicare and Social Security benefits.
Central bankers are supposed to abhor market bubbles, but Greenspan
blew air into two of them -- a stock and a housing bubble -- by
keeping interest rates low. American consumers responded by
borrowing money against their paper profits. They spent the dough,
which propped up the economy. Now consumers are burdened with debt.
Part of America's economic prosperity, The Economist notes, "is
based not on genuine gains in income, nor on high productivity
growth, but on borrowing from the future." As the Austrian economist
Ludwig von Mises once said: "It may sometimes be expedient for a man
to heat the stove with his furniture. But he should not delude
himself by believing that he has discovered a wonderful new method
of heating his premises."
It's true that Greenspan presided over 18 years of economic
expansion, broken by only two mild recessions, but there are
explanations for that record other than the man's greatness.
Economists note that the move to a service from a manufacturing
economy reduced volatility. Globalization kept prices down.
Greenspan devotees portray their hero as an anti-inflationary
Superman -- but other industrialized nations have seen equally
impressive drops in their core inflation rates. Job growth,
meanwhile, has been mediocre.
Greenspan leaves behind an America that is the world's leading
debtor nation. The United States must now borrow $2 billion a day
from foreigners just to stay afloat. Its personal-savings rate is
negative. And its current account deficit (the trade deficit,
broadly measured) is 7 percent of gross domestic product -- almost
double the previous U.S. record.
So expect a lot of economists to be sitting on their hands as
Greenspan departs the Fed at the end of the month. Even his Enron
Prize for Distinguished Service, which Greenspan accepted a few days
after the energy company admitted to filing falsified earning
reports, doesn't impress them. But the songs of praise from Bush and
his campers will more than make up for that silence. Boy, do they
owe him.
-------------
Froma Harrop is an editorial writer for the Providence Journal and a
syndicated columnist.
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