According to Greenspan

Very few in the world of economics can challenge the genius of Alan Greenspan. This 81 year old financial genius was at the helm of the strongest economy in the world, the Chairman of the Federal Reserve, for 2 decades. He led The Fed through 4 presidencies, until last year when he voluntarily stepped down and was succeed by Ben Bernanke.

While his last years were mired by criticism for his handling the economy and keeping the interest rates too low which some critics blame for the housing bubble, he is also credited with saving the economy from disastrous recessions; notably 1997 and more recently following the 911 attacks in 2001.

I will not delve into Greenspan's biography nevertheless I will mention that he is learned and has previously served in several seniority positions. A well traveled man, Greenspan wined and dined with the wealthiest in the world and as such had numerous connections and ideas of how and where the market was heading.

While one might argue that some senility associated with old age had started to erode his brilliant mind, it's his global connections that dictated the direction of the markets.

This brings me to today's observation: Greenspan single-handedly facilitated the collapse of the US economy not only by cutting and maintaining key low interest rates, but also by encouraging banks to aggressively promote alternative lending products, specifically, subprime loans. While this was his idea of revamping the economy, he has as of 2005 admitted that he had no idea that it would get out of hand, nevertheless, he did predict that the housing bubble that he had created would burst in a relatively short period of time. Perhaps this might have played a role in his untimely resignation from his coveted chairmanship.

If he helped to create this problem, then perhaps he should know how to resolve it. When he suggested financial aid to the home owners, perhaps it's because he understood that most had bit more than they could chew and in the interest of the overall economy, it would be best to give the home owners some money to pump back in to the economy. Consumer spending has tremendously fallen in the wake of high mortgages and market uncertainties.

After conferring with several of my friends, all of whom have been or know someone whose home has been foreclosed on, the consensus was that the Government should take a more aggressive approach into this quagmire in the interest of saving the economy and the nation at large. They all concur that the home values were inflated and if the Govt. would reappraise them and rewrite new loans then perhaps they would be tempted to keep them otherwise they would just walk out of the loans. They figured that it was easier to rebuild their credit than to pay off their non-recourse interest only mortgages that would reset every 6 months. Very easy decision given the fact that most of them were paying an average of 4k-9k/ month. Big loans.

It seemed like a good idea to investigate all the banks involved with the mortgage fraud that became evident as more owners defaulted on loans that should have never been written in the first place based on their inability to honor their obligations. That it was in the interest of the economy and nation at large to prosecute these banks and brokers rather than bail them out in the guise of bailing out the home owners (victims).

While Greenspan would probably fall in this category for facilitating the whole fiasco under his watch, the best solution forwarded was to dissolve the Fed and replace it with a Govt. owned and operated central bank. The discussion also pointed out that several members of both houses of Congress were very hesitant in "grabbing this bull by the horns" because they too were guilty of not activating or heeding to the recession and inflation prevention mechanisms in place, but that they profited from the said scam by turning into overnight investors and using their influence to score big deals. They exploited the bubble by delving head first into the real estate business and when they could have stymied the bleeding earlier, held back until they unloaded their investments.

One should not look for a meaningful reaction from Congress regarding the investigation and prosecution of the fraudulent banks or the immediate decommissioning of the Fed. At least not from the current do nothing bunch.

So where does this leave us? In a nut shell, this leaves us between a rock and a very hard place. We are now ripe for a hostile take over from foreign investors such as the Chinese and the Arabians. While the Chinese are guilty of swiping away our manufacturing jobs, (the second major reason for our recession), the Arabs are systematically and increasingly buying controlling interests in our fledgling banks and corporations, the most recent being Citi.

If history holds true, then the golden rule will prevail; those who have the gold make the rules!! The Arabs give us oil, but do we know what they do with our dollars? Are they using our dollars and our capitalistic system against us? Why do they have Govt. sponsored holding companies buying everything they can get their oily hands on? And to think that they have transformed their desolate desert into an oasis of envy at our expense is not only Inferiororating but criminal.

Perhaps the next adminsistration will usher a new dawn of economic policies; perhaps they will continue business as usual. Perhaps they will heed to Greenspan's suggestions to arm the consumers with financial aid. Whatever their game plan is, they will inherit a country waist deep in the greatest depression in history.