Thursday, October 23, 2008

Credit Tsunami – Greenspan

US facing 'credit tsunami'
America is "in the midst of a once in a century credit tsunami", a former US Federal Reserve chairman has said. Alan Greenspan warned that a "significant rise" in unemployment was unavoidable as the United States works its way through a massive financial crisis that will not ease up for many months. The former chairman of the US central bank also told the oversight committee of the US House of Representatives that he had made a "mistake" in believing that banks, in operating in their self-interest, would be sufficient to protect their shareholders and the equity in their institutions. "We are in the midst of a once in a century credit tsunami," Mr Greenspan said. He added he realised his "mistake" when he found "a flaw in the model that I perceived is the critical functioning structure that defines how the world works". As head of the Fed from 1987 to 2006, Mr Greenspan presided over much of the excess lending and expansion of the subprime mortgage market in the US that prompted the current economic crisis.

Okay, Bernanke warned last year that the sub prime crash would be worse than anyone had predicted and now the venerable and evil Greenspan has come out to say he thinks a credit tsunami is on the way. I think it is time to stop listening to the desperate Wall St sharks who keep promising that we’ve reached the bottom, they are just like Real Estate Agents who keep trying to plead that now is a great time to buy a house, these people have a vested interest in trying to dress it up, Greenspan on the other hand presided over much of the build up of this bubble so criticisng his own reign is as close as to sorry as he gets. The Europeans are talking about reconstructing deregulated capitalism, perhaps they have a point, the days of the Free Market on meth may be over, but the total cost is going to be a hell of a price to pay for such a lesson.

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