Greenspan Shrugged redux: The Alan Greenspan-Ayn Rand connection revisited

My newspaper column today, "Alan, Just Like Atlas, Shrugged," exploring the price we’re paying for former Federal Reserve Chairman Alan Greenspan’s admitted “flaw” in his objectivist philosophy drew a fair amount of feedback.

Here's a sample from readers...

Ayn Rand's Objectivist Opus

Ted Potts of Leawood writes: Thank you for your article. While I found it enjoyable, and fairly accurate, I would like to point out that Ayn Rand viewed government as essential, not just “an obstacle.” She would agree, I believe, that today’s governments are obstacles to innovation, investment, and creativity; but she had immense admiration for the founding fathers, and believed the Constitution of the United States was the most important political document in the history of mankind.

If given the opportunity, I believe she would also point out that today’s market participants are not a part of a free market, but are rather players in a grotesque nation-state environment, in which capitalism and socialism are heavily mixed by non-market participants, forming an elaborate and confusing labyrinth.

One day, after America has failed at every other political system, maybe we will legalize laissez-faire capitalism and witness creativity and economic growth even greater than America in the post-war 19th century.

Joseph Kellard of East Meadow, N.Y., writes: The economic meltdown in the U.S. was essentially caused by government intervention and regulations, not their lack thereof. For many years now, banking, housing and insurance have been the most regulated areas of the economy.

As to Mr. Greenspan, the philosophy he put into practice is the opposite of capitalism. Back in the 1960s, Ayn Rand taught him why capitalism requires that there be a wall of separation between economics and state, and why the Federal Reserve, as the state’s central economic planner, must be abolished. Yet Greenspan went on to become the Fed's leader and champion — keeping interest rates artificially low and manipulating the money supply. So he long ago rejected Miss Rand's philosophy of Objectivism — and now he and all of us are paying the price for it.

Herman Kirkpatrick of Leawood writes: I enjoyed reading your article this morning regarding Greenspan, Ayn Rand, etc. I don't know where these people would come from if not academia. That aside, it is also interesting how people become so attached to a philosophy that they render themselves inflexible. One would think that these academics, politicians, etc., would lend themselves to modifying their philosophies.

As much as I dislike “committees” and such, it seems that this might be one answer; a few people to discuss and agree on courses of action on issues of economics. It is scary when politicians with their self interest become involved. We need more objectivity if possible. Incidentally, I am furious with the earmarks and selfish behavior and the lies told during this election cycle, and all that from our Senators and Representatives. It is no wonder that they are held in such low regard. And we only see the tip of the iceberg, so to speak. Our system isn't “broken,” but the people in control are prostitutes for the almighty vote.

And, finally, one of our regular bloggers here at Dollars & Sense, Cal Jones of Perkins, Smart & Boyd in Fairway, offers this take:

I’ve railed on “poor” Alan and his successor, B-B-B-Benny for years, warning their policies would create great pain. The sad thing is, if you understand the Austrian theory of the business (trade) cycle, this was easy to see coming. Our government deliberately doesn’t teach this kind of economics in public schools because Austrian economics states government intervention is, at the very best, bad. They teach Keynesian economics and its derivatives because those schools of thought agree government intervention is good, and that government has a legitimate place in manipulating the economy. Welcome to the result of too much government interference! Ignorance is NOT always bliss, is it?

Greenspan said he was “shocked” the management of the banking system didn’t factor in risk properly and protect shareholders more. He stated that this was a “flaw” in his ideology and that he was “distressed by that.” Naturally, he agreed with the Congress that the regulatory environment in banking was not adequate and that new regulations were required.

What’s truly sad (or funny, depending on your point of view) is that even when admitting his mistake, Alan was still wrong. Let me repeat: Greenspan is admitting to the wrong mistake. This was not a failure of capitalism or free markets; this was a failure of government. Management and investor actions, the housing boom & bust, and most, if not all, of the other effects were easily predictable, given the unnaturally low interest rate environment Greenspan promulgated. As the old TV commercial used to say, “It’s not nice to fool Mother Nature.”

Last week, the government proved it is incapable of learning from the past as Bernanke’s Fed lowered the overnight Fed Funds rate to 1%, exactly the low the Greenspan Fed reached a few years ago. While the reasons are different now, what makes Bernanke and the Fed think that taking more of the same poison that put us here will cure us now? Unbelievable.

The regulatory environment our now liberal, socialist Congress (Nancy Pelosi, Barney Frank, et. al.) will now impose on the banking system will only impede and delay our ability to dig ourselves out of the market distortions and recession congressional policies caused. It’s a power-grab, pure and simple. Moreover, it won’t improve your life, unless, of course, you are a government regulator.

Even the Ayn Rand Institute has weighed in on the topic.

Your thoughts, as always, are welcome here at Dollars & Sense.