Steve Forbes with a resounding call for stable, low-entropy money.
Greenspan truly began to think he was a monetary philosopher king who could fine-tune economic activity by manipulating short-term interest rates. Greenspan’s Louis XIV “I am the state” proclivities were intensified when he fell under the sway of a strange theory of Ben Bernanke’s. Bernanke joined the Fed as a governor in 2002 and posited that the world was plagued by “excess” savings. China, India and other countries were saving too much money. Preposterous! In a properly functioning global financial system there can be no excess savings. The whole purpose of finance is to direct savings from one party to be invested with another party. The enormous amounts of liquidity that led to the housing and commodities bubbles of recent years cannot be blamed on thrifty Chinese but on the excess money creation of Greenspan and Bernanke. If their central goal had been a steady value for the buck, those bubbles would never have reached the sizes they did, and volatility in the financial markets would have been only a fraction of what it is today.
Here’s Forbes making the point from Davos.
