Paul Krugman Documents Alan Greenspan’s Praise of the Financial System - New Instruments Were a Great Contribution Mr. Greenspan Said

Unfortunately They Were a Great Contribution to World Wide Financial Ruin

One of the delights in the daily reading of Paul Krugman is that he is not a modest person.  Modesty is very over-rated.  Were Mr. Krugman a more modest person he would not devote some of his writings to pointing out how he was right about most things, and other persons, those whom he calls VSP’s or Very Serious People, were utterly wrong.

Recently Mr. Krugman unearthed this comment by former Federal Reserve Chairman Alan Greenspan, once hailed as a great sage, now recognized as the great and powerful Oz, a charlatan hiding behind a curtain.  Here is Mr. Krugman’s quote from Mr. Greenspan

Deregulation and the newer information technologies have joined, in the United States and elsewhere, to advance flexibility in the financial sector. Financial stability may turn out to have been the most important contributor to the evident significant gains in economic stability over the past two decades.  .  . These increasingly complex financial instruments have contributed to the development of a far more flexible, efficient, and hence resilient financial system than the one that existed just a quarter-century ago.

Of course, what we now know, only a few years later is that what Mr. Greenspan believed was the exact opposite of the truth, that the technology and complex financial instruments were a prime contributor to the near collapse of the financial system, and the world wide recession that went along with that near collapse.

What an idiot.  Unfortunately this idiot was the one person in a powerful enough position to have done something that could have prevented all this.  Thanks Alan, we couldn’t be where we are without you.