Sebastian Mallaby: evaluation

Transcript context

…What is it you understand about Alan Greenspan — having written a whole book about him — that other intelligent, educated people do not? Behind the title I chose for the book, The Man Who Knew, the key thing was that Alan Greenspan had written a PhD thesis mostly comprised of papers he read in the 1950s. Nobody had found that thesis until I found it. When I read it, what it told me is that in the ’50s — in other words, right at the beginning of his professional career — Greenspan’s obsession was with stock market bubbles. He was really preoccupied with the way that bubbles could drive recessions in the real economy. Balance-sheet effects were at the core of his PhD work. Now, once you understand that, it tells you that Greenspan failed in his own tenure at the Fed to prevent the mortgage bubble from inflating. He failed not because he didn’t understand about balance-sheet effects. He knew about balance-sheet effects. He was the man who knew. He knew more about them than most of the critics who suddenly discovered in ’08, “Oh, balance-sheet effects. Gee, we better go read Hyman Minsky. This is a big deal.” Greenspan knew about them, and yet he let the bubble go wrong. What does that tell us? It tells us that the institution of the Fed was sort of trapped into a position where inflation targeting had become irresistible, and they just targeted inflation and paid no attention to asset bubbles. I think that was a big mistake. How is Jerome Powell doing?…

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