Tuesday, January 8, 2008

Irrational Exuberance

Currently reading 'The Age of Turbulence', Alan Greenspan's autobiography. Much more interesting and better written than I expected. At least the first half is - a bit of a tougher slog through the second half. Greenspan does a great job of describing the role of the US Fed and how it operates. Greenspan - makes sense - was incredibly well connected and worked in many US administrations. He considered Nixon and Clinton the smartest Presidents he worked and Gerald Ford perhaps the overall best.

Greenspan certainly is not a fan of George Bush or at least his economics/lack thereof. Some interesting facts. "Debt to the public outstanding projected for the end of September 2006 was $1.2 trillion. The actual outcome was $4.8 trillion." As Greenspan says "that is a rather large miss". A key factor according to Greenspan was the Republicans desire to become the permanent ruling party in the US and their use of public money to fund that. He points out that earmarks (side spending deals in key spending bills) proliferated from 3,023 at the end of Clinton's first term, to 16,000 in 2005, the beginning of George Bush's second term. Interestingly, defense expenditures were only 4% of GDP in 2006, vs 9.5% during Vietnam and 14% during the Korean war.

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