10 May 2012

Michael Hudson and Pierre Rinfret: The Myth of Alan Greenspan

Although he is now passed away, and his internet site has been discontinued, economist Pierre Rinfret published some rather pithy descriptions of the people whom he had known during his long career as an economist in the commercial world, and the halls of power of the US government.    I was reminded of that today by the video from Michael Hudson which is included at the bottom.

Pierre Rinfret was a very good economist with a long and successful career, but made a fairly awful politician to say the least.  That is to say, he was not a politician at all, and why he ever let them talk him into his one fateful run at it is still a bit of a mystery to me.

He was famous for telling the economic truth, even when those in power did not want to hear it.  And he was outspoken, too much so for the pampered princes of politics and the media.   He himself was often naive I think, in believing that the truth would prevail even among those who were determined not to see it because it conflicted with their interests, and that those to whom he had been loyal would repay him in kind.  He was 'set up' to take a loss in his run for governor of NY.   But that was just politics and he had made quite a few enemies, especially amongst the emerging neo-conservatives who took control of his beloved Republican Party. 

I had the opportunity to discuss quite a few things with him before he died, and I found that his information often tracked with things that I knew. We differed greatly on some subjects, especially when it came to certain loyalties he held to faithfully, and on the role of the US dollar as reserve currency going forward. But I welcomed his perspective given the differences in our age and his direct experience with so many of the famous and with the Great Depression. He was an intelligent and often passionate man with a good heart.  I was sorry to see him go, and I remember him in my prayers, as I will remember you.

Here is his stated reason for producing his site.
"I have come to realize that the vast majority of decent, wonderful people, have no idea how they are being hoodwinked day in and day out by the scum of this world. We are lied to, misled, bamboozled, suckered, cheated, misrepresented, conned, manipulated and royally screwed!

They take us to the cleaners day in and day out in every way possible. We, the people, pay the price of their cheating, their folly, their lying and their sheer stupidity."

Although he discussed a wide range of subjects on his website, and had a wonderful section on the Great Depression, what had made it controversial was a set of memoirs called 'People I Knew' that remains only in the internet archives now.  We have to keep in mind that what he says are one man's opinions, and everyone is subjective whether they realize it or not, especially in their opinions of other people.  So I try to concentrate on the facts in what people say, and take the opinions with a grain of salt.

His description of Alan Greenspan was very similar to the description provided here by Michael Hudson in the video interview below.

Here is what Pierre had to say about his impressions of Alan Greenspan:
"I first met Alan Greenspan in 1948 when we both attended the New York University School of Commerce, Accounts and Finance. At that time I was the senior fellow in the Economics Department. The run in was a forerunner of his behavior throughout his entire life. But I am not going to bore you with the gruesome details.I have, therefore, known Dr. Greenspan for more than 50 years and I must say that he has always underwhelmed me! I was in the class of NYU before him and our paths crossed innumerable times in our professional careers.

I debated him on many an occasion, we shared many speaking platforms together, we both worked for Richard Nixon in the 1968 and 1972 campaigns as well as in between , we both graduated from NYU undergraduate school and Graduate School and we both ran our own economic and financial consulting businesses. In addition we played golf together more than once with mutual friends.

One of the absolute lies about him is that he retired from his consulting business a wealthy man. Absolutely and totally untrue. When he closed down his economic consulting business to go on the Board of the Federal Reserve he did so because he had no clients left and the business was going under.We even went so far as to try and hire some of his former employees only to find out he had none for the 6 months prior to his closing. When he closed down he did not have a single client left on a retainer basis. His only source of income was his speech making. As a speaker he had to be the ultimate bore exceeded only by Paul McCracken about who Richard Nixon told me on many an occasion "When he talks MEDGO" meaning "my eyes doth glaze over".

He had a horrible record on forecasting the American economy.  He missed calling, in advance, every single recession in the entire postwar period with only one exception. He neither called recessions nor expansions for the very simple reason that he has never been one to stick his neck out. In American industry they don't pay consultants for Pablum or for saying what everybody else does! And that is what he has always served up:  Pablum...

The driving force that may push Greenspan more than anyone or himself realizes is that he graduated from the "Bronx High School of Science" and that his peers included one Henry Kissinger and other famous (infamous?) politicians of about his age. A classmate of his once said to me that Alan had to prove to them that he was as smart as they were...

I once called him a political hack in a speech before the Chamber of Commerce in Chicago and I did not retract that statement then or now."

The problem is not that Alan Greenspan himself may have been 'a hack' who was willing to say and do whatever power politics required.   There is certainly evidence that he was surrounded by secrecy, and a bit of mythology regarding his infallible judgement that was promoted at the time by the popular press.

The real problem is that being a hack has become fashionable, almost de rigueur, and public policy decisions are being regularly distorted by hacks, economic and otherwise, who are willing to say and do almost anything to curry favor from power, but often dress those political opinions up as science.

 And they are defended by other economists and media people  and talking heads who also seek to curry favor from power, in a pyramid of intellectual corruption.    I have seen this contagion destroy very large companies, and apparently that works for countries as well.

This is of course nothing new.  I have previously written about the book and testimony of A. Newton Plummer, a Wall Street 'public relations man,' who had testified to Congress, most effectively with a suitcase full of cancelled checks in hand, about the widespread payoffs to almost every financial pundit on the Street, that helped to fuel the rampant fraud that led to the Great Crash of 1929.
Financial collapses that are not due to natural disasters or war are always founded in fraud.  And if you dig a bit, you will find that there are individuals behind it.  It is not some random madness, but a weakness of character, a perennial gullibility, a feeling that 'everyone is doing it,'  that seems to be exploited periodically by heartless individuals.

Pierre was of the opinion that not everyone is bad, and he was no misanthrope as you can tell from his first quotation above.   But there is always a small number of people who will say or do almost anything to get ahead, and who will obsessively seek money and power. 

In certain periods of history they seem to become more socially acceptable, and less furtive.  And by example and influence they can corrupt the weak, who are many.   I had come to a similar conclusion based on personal observation, and the theory of the white collar sociopath as a foil to the romantic notion of the efficient markets hypothesis and the natural goodness of markets.  To assume that people are perfectly rational and self-effacing actors, like angels, is a dangerous folly.

People are corruptible, some more readily than others, and there are those who are a bad sort, a bad seed if you will, who will corrupt them if the system and the people do not actively oppose it.  It seems fairly simple and common sense when said that way, but if you apply it to certain financial systems and their underlying assumptions, you see their weaknesses exposed.  
Corruption hides, and so you look for those who operate in the dark.  When things seem to come mysteriously rushed out of nowhere with little factual basis behind them, and don't make sense, then they probably don't.  This holds true for the Iraq war, and the bank bailouts, MF Global, and the financial and commodity market scandals that are yet to be revealed. 

These are dangerous times of course, because when a people, a nation, have bought into a lie, occasionally they decide that they have gone too far to return, and follow their deceits, straight into a living hell. This is how even an educated and civilized people can, on the whole, gradually become torturers and monsters, often without even realizing it.
"Those who can make you believe absurdities, can make you commit atrocities."

So we see times when corruption seems more prevalent than others.  I think we are in such a time now, as a legacy of the embracing of the 'greed is good' mentality in the 1980's.  Where it will take us, who can say.   But it seems fairly clear that the economic system can only be restored to some working order through reform, transparency, and accountability.

Michael Hudson: Firing Alan Greenspan

By the way, before you write me about it, I do not agree with Michael Hudson on Social Security, and his aversion to taking out money as 'pre-savings.' I think the fact that it is pre-paid insurance, rather than a pure social spending program, without means testing, is one of its enduring strengths. Its greatest single problem is that the deduction cap has not kept pace with inflation. And I think Obama is willfully undermining it with these payroll tax cuts, but that is a matter for another day. But I do find those who promote canards about those bonds in the Trust that seek to justify a 'selective default' in Social Security to be contemptible. If those bonds are no good, then no US bonds are good, and it is time to restructure, revalue, and reissue the currency. And issue plenty of indictments. Therein lies the credibility trap.