Smith Faculty Opinion Article

John Haslem By Dr. John A. Haslem, Professor Emeritus of Finance
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The 30 Seconds Outlook
April 1, 2011

“Begin at the beginning," the King said, very gravely, "and go on till you come to the end: then stop.”
- Lewis Carroll, in “Alice,” 1832-1898 

At a recent speech at the Counsel of Foreign Relations, former Fed Chairman Alan Greenspan took exception to the massive government intervention to save the economy. He made several points:

  1. We need less government intervention to get the “economy rolling” with more business investment in plant and equipment.
  2. “What we need to do is to calm down; let things move by themselves.”
  3. The main culprit behind the lagging economy is the $787 billion Recovery Act.
  4. Government borrowing to finance deficit spending has “crowded out” smaller company borrowing at rates too high (8-9%) to finance new investment.
  5. Government borrowing is “effectively reducing long- term capital investment by one fifth.”

Greenspan finds company in former FDIC Chairman Bill Isaac’s statement that “any objective analysis would conclude that the TARP legislation did nothing to stabilize the financial system that could not have been done without it.” Well, that about says it all.

John A. Haslem