Cognitive Deficit


There are many things to say about Alan Greenspan’s op-ed yesterday, none of them complimentary. But what struck me is the passage highlighted byTim Fernholz:

Despite the surge in federal debt to the public during the past 18 months—to $8.6 trillion from $5.5 trillion—inflation and long-term interest rates, the typical symptoms of fiscal excess, have remained remarkably subdued. This is regrettable, because it is fostering a sense of complacency that can have dire consequences.

You know, some people might take the fact that what’s actually happening is exactly what people like me were saying would happen — namely, that deficits in the face of a liquidity trap don’t drive up interest rates and don’t cause inflation — lends credence to the Keynesian view. But no: Greenspan KNOWS that deficits do these terrible things, and finds it “regrettable” that they aren’t actually happening.

Greenspan’s been wrong about everything else, why break his record?

3 thoughts on “Cognitive Deficit

  1. Thanks for saying this, Susie!
    Love hearing it.
    Again and again!!!!
    Hard to believe that we had someone on the public payroll so long who only wanted to hear that inflation was raging and we needed to raise interest rates to cut off the job growth again isn’t it?
    Or maybe not?
    After all, these guys were paid very well to do so.
    Greenspan’s been wrong about everything else, why break his record?

  2. What fascinates me is that anyone gives has the credulity or mercenary tendencies to print anything by Greenspan. He lacks the credibility anymore. “Frothiness”?

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