One of the most respected and longest-tenured asset managers in the world of finance, Jeremy Grantham, has penned a thoughtful critique of Alan Greenspan in (The Bubble Deflates - Part 7: The Easy Part Ends (10/02) — starts on page 4 of the PDF file). Grantham’s thoughts run along the following lines. Greenspan showed through public statements and Fed records later released that he knew there was a bubble, and that its undinwing would do tremendous damage to the economy. He could have done something to stop it (Grantham misses the point that the Fed created it in the first place), but instead spouted a series of specious arguments about “the New Economy”, “productivity”, “efficient markets”, and the impossibility of being certain in advance of the impact of any actions they might take. After the bubble burst, Greenspan has issued a lame, self-justifying explanation, blaming the same investors who a couple years before were efficiently pricing stocks for their bubble psychology. The problem in the end was political — bubbles are popular while they last, but no Fed chair wants to be the one to take action to reign one in, once unleashed.
Grantham takes aim at Greenspan
