Greenspan, the Keith Richards of central banking, was famous for the "Greenspan put", which somehow was already named after him. This is the idea that monetary policy should focus on cleaning up the mess after an asset-price bubble rather than taking preventive action. During the last decade this meant loose monetary policy all the fucking time. In his book, George Cooper called this "preemptive asymmetric monetary policy". You can simply call it for what it is: Fucktardery. The justification for a refusal to target asset prices when setting interest rates was that it was super hard to tell what a bubble looked like. If only information like this was widely available years in advance. The closest Greenspan ever came to admitting there was a housing bubble during his tenure was to allude to some "froth" in certain local markets. Central banking is hard.
Although the Greenspan put seemed to work okay in 1987, 1990something, and again in 2001, it bred a complacency in financial markets that contributed to the euphoria before the current crash, since Grandpa Alan and Uncle Ben would always be there to make everything okay. When Greenspan finally did begin raising rates, for example, he did so in an utterly predictable fashion, by 25 basis points, every damn time. He never gave markets the gut check they needed. Obviously, no one now thinks that waiting to clean up the mess after an asset bubble is preferable to an attempt at prevention. The pain of that mistake has become all too clear in hindsight.
Which brings me to my advice for current Fed chair Ben Bernanke.
Update: Wow. Greenspan has company.
In lighter news, US treasuries spiked as investors fled screaming from central and eastern Europe, which is on the brink of financial meltdown, since they've insisted on reenacting the Asian financial crisis of 1997. Current account deficits, foreign currency debt, capital flight, currency routs, retarded central banks--they've got it all. More unique, and disturbing, is the fact that so many eastern European banks are foreign-owned, mainly from western Europe. Whether these banks are pulling back now simply due to risk aversion or "financial protectionism", the fact is they are and it really sucks. The IMF is hiring.
Jeff Immelt of GE decided to wave his huge bonus which he'll probably collect next year.
Douchebag Texas bazillionaire Allen Stanford is the new Bernard Madoff.
And Chrysler and GM are begging for another $21 billion in loans from the Fed, even after plans to restructure were announced.