Jerry Dworkin (UC Davis) writes:
From today's NY Times.
"For more than a decade, the former Federal Reserve Chairman Alan Greenspan has fiercely objected whenever derivatives have come under scrutiny in Congress or on Wall Street. “What we have found over the years in the marketplace is that derivatives have been an extraordinarily useful vehicle to transfer risk from those who shouldn’t be taking it to those who are willing to and are capable of doing so,” Mr. Greenspan told the Senate Banking Committee in 2003. “We think it would be a mistake” to more deeply regulate the contracts, he added."
And this:
"An examination of more than two decades of Mr. Greenspan’s recordon financial regulation and derivatives in particular reveals the degree to which he tethered the health of the nation’s economy to that faith. As the nascent derivatives market took hold in the early 1990s, andi n subsequent years, critics denounced an absence of rules forcing institutions to disclose their positions and set aside funds as a reserve against bad bets. Time and again, Mr. Greenspan — a revered figure affectionately nicknamed the Oracle — proclaimed that risks could be handled by the markets themselves. “Proposals to bring even minimalist regulation were basically rebuffed by Greenspan and various people in the Treasury,” recalled Alan S. Blinder, a former Federal Reserve board member and an economist at Princeton University. “I think of him as consistently cheerleading on derivatives.”
Put this together with Keynes:
” . . . the ideas of economists and political philosophers, both when they are right and when they are wrong, are more powerful than is commonly understood. Indeed the world is ruled by little else. Practical men, who believe themselves to be quite exempt from any intellectual influences, are usually the slaves of some defunct economist. Madmen in authority, who hear voices in the air, are distilling their frenzy from some academic scribbler of a few years back."
and we get Ayn Rand as an important cause of the catastrophe we are in.
UPDATE: I gather some readers did not know that Greenspan was not only a friend of Rand's, but a lifelong devotee of her ideas and her 'philosophy,' such as it is. There is more detail here.
ANOTHER: Jerry Dworkin replies to Mr. Wilkinson here.
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