Today, the always interesting Alex Pollock of the American Enterprise Institute has good piece in The American about the bets that former Federal Reserve chairman Alan Greenspan made on the economy. It starts this way:
In the wake of the burst tech stock bubble and the shock of the terrorist attacks, the Greenspan Gamble was to purposefully ignite a housing boom. Ex ante, it was a reasonable gamble and it almost worked.
What can we conclude from this saga? The ultimate failure of the Greenspan Gamble notwithstanding, the Fed will continue to be extremely useful in helping ameliorate busts and financial panics, just as intended in 1913 and practiced from 2008 to 2009. This extreme usefulness to the government insures its continued influence and authority, which may very possibly include acquiring wider jurisdiction as the “Super Fed.”
But it is in vain to think that as the Fed or as the “Super Fed” it could foresee all future problems or prevent future bubbles and busts. It is even in vain to think it could consistently make correct forecasts of the results of its own actions. Everybody, no matter how clever and diligent, no matter how many economists and computers are employed, makes mistakes when it comes to predicting, let alone controlling, the future.
I agree. No one is perfect. Everyone makes mistakes. But then shouldn’t the Fed acknowledge its limits and stop interfering so much into the economy?
Read the whole thing here.