泡沫泄气——第七部分：轻松阶段结束

GMO Quarterly Letter October 2002 Jeremy Grantham, Chairman The Bubble Deflates – Part 7: The Easy Part Ends Comments on the Economy and Markets complete. Greenspan’s egregious denial of any The third quarter for the global equity markets was one of responsibility for the bubble – sometimes blatantly the most brutal quarters and the worst September since contradictory of his earlier statements – brought forth 1937. The global economy seems at least a little weak in another wave of analysis. the knees and the risks are higher than normal. Japan and The total impact is that all investors, institutional as well Germany seem particularly unable to fix their problems. as individual, feel betrayed by too many components of The threat of war with Iraq does not help. The US our financial and governmental system. The business world, so recently the envy of the world, has consequences will be far-reaching and already they have continued to disillusion everyone, including us at GMO, hastened the inevitable market correction towards fair with the degree of ethical compromise and even outright value. At a later date this disillusionment may play an cheating. Investors did not seem to be getting a fair shake, unfortunate role in determining just how far the market particularly individuals but also institutional investors. will overrun fair value, for overrun it very likely will, as Too many of the moving parts – top management and we have found no historical exceptions to this tendency to chunks of Wall Street – were not just putting their own overrun. interests first, but doing so with a disdain for clients and stockholders not seen since the late 1920s. To repeat our usual main point, bubbles forming and breaking are by far the most important points in market Little by little this year, the layers of self-serving history. If everything is done right, there will always be behavior have been revealed. The President’s previous lots of pain. If anything is done wrong, there will be more corporate behavior is apparently not above suspicion. It is pain. It is increasingly impressive and surprising how clear that many congressmen (led by Senator Lieberman), much we have done wrong this time. who in general seem reasonable enough, really did put their campaign contributors ahead of the integrity of the Market Sectors financial system, beating back efforts to reform There was a strong sense of growing global crisis during accounting standards and accounting firms. the quarter, and quality began to strongly outperform in More smoking guns have been found around Greenspan. almost all countries including the US, from mid quarter He really did seem to believe in the dangers of a bubble; into October. Small and value, associated with lower for a while even that a bubble existed. He thought then at quality in a crisis, began to underperform everywhere least that he had the tools to arrest the bubble, mainly by except Australia, which has interestingly been able to increasing margin requirements. That he did not is not hold onto the old themes of small and value longer and very remarkable for he would have taken a lot of political outperform most markets into the bargain. grief, but it is disappointing that he could not have been Value stocks in the US underperformed a desperately tougher. Certainly it is nowhere in his job description to weak S&P 500 (-17.3%) by 1.4% and value have been such an eloquent advocate of the new underperformed growth by 3.7%, probably the worst economy. (My views on Greenspan are attached as a value has done in a double-digit bear quarter since the separate piece.)

1930s. This relative underperformance was bound to Most of this damage occurred long before the third happen sooner or later, but to do so in such a weak market quarter, but during the quarter little pieces of the puzzle was unusual timing. The unprecedented value versus were added day by day and the picture became more growth spread of March 2000 had closed by September 2001 and, after a fourth quarter 2001 growth rally, had the first time in the 12 years we have been doing asset passed through normal by June 30 into overshoot allocation. The potential 7-year return for some non-US territory, which is typical. Small stocks had also closed components such as small cap value and emerging is their equally unprecedented gap by June. The remarkable downright attractive. The downside to this is that the defensiveness of these two bets – rising for the first 21 chance of any foreign stock components actually rising if months into a steadily falling market – has been more the US market falls is somewhere between slim and none. impressive than we could reasonably have hoped for. In But it is better to take pain in an asset with a prospective the second quarter letter, I had mentioned that both were return of 13% real rising to 17% than in the US rising substantially overpriced in an absolute sense and were from 2% to 6% (which incidentally only takes two more very likely to suffer severe absolute pain, particularly as Septembers). The gap in value between US and non-US they both have substantially more cyclical exposure than equities is actually as cheap as it has been in 40 years the S&P 500 and the economy remains very vulnerable to (Exhibit 1). The past moves between US equities and slower growth than expected. The actual quote was “both EAFE ex-Japan have been powerful and long-lasting, and groups will lose a substantial part of their defensiveness the past move in favor of US equities was the longest. as the market continues down.” Little did I know how Exhibit 2 suggests the cycle may have turned towards quickly this test would arrive and how conservative “a EAFE ex-Japan and even if it has not, we expect it to turn substantial part” would look. Having said that, by the end soon and make a large multi-year move the other way. of this bear market we expect both value and small to hit This gap between two of the three great building blocks new relative highs but to do so with much greater of asset allocation can provide the fuel for several years volatility and some very painful periods. of substantial value added, but of course as usual, the In international markets, small and value fell off their course of mean reverting true love will not run smooth. relative highs but were able to hold on to a draw for the Our preference now on a 7-year horizon is non-US quarter. equities first, fixed income a fairly distant second, and US Our estimate of fair value is 670 on the S&P 500 and equities third. Even within US equities, REITs are far 1050 on Nasdaq. The difference from the recent early better than fixed income and small cap value probably a October low is practically rounding error. Almost 99% of little better. Indeed, fixed income by dint of brilliant the pain of the Nasdaq, falling from 5050 to 1050 was performance since March 2000, has become substantially completed, and 83% of the pain of taking the S&P 500 overpriced. Inflation protected US government bonds from 1550 to 670 was behind us. What we all have to (TIPS) have dropped from a mouth watering 4.1% to a worry about now is the degree of overcorrection. If it is downright frugal 2.4% after double-digit annual returns. severe, and it may be, it may also interact with an already If the crisis mode we have in the stock market continues, weak global picture. they will probably do well even from here, but sensible 7-year planning requires a phase-out of the bet in this area Asset Allocation and regular government bonds.

The third quarter, though, was positive in some tough The tension between overpriced bonds and a crisis mode love ways. Non-US equities became absolutely cheap for in equities, especially overpriced US equities, has finally the first time in years and cheaper than fixed income for forced us into some cash and cash equivalents. For 12 Exhibit 1 Composite Valuation of EAFE ex-Japan vs. S&P 500 Composite Valuation of 1.4 Emerging vs. U.S.

1.7 1.3 1.5 1.2 1.3 1.1 28% 1.1 41% 1.0 0.9 0.9 0.7 0.8 0.5 0.7 0.3 N 77 80 83 86 89 92 95 98 01 GMO Quarterly Letter – October 2002 2 Exhibit 2 EAFE EAFE ex-Japan ex-Japan +71% +9% 1.2 S&P S&P EAFE S&P 1.1 +58% +96% ex-Japan +80% Cumulative Relative Wealth +76% 1.0 0.9 0.8 0.7 0.6 0.5 May-73 76 80 83 86 90 93 96 00 years of asset allocation we have always found something equities lost by 1.1% (+5.1% year-to-date). All in all, better, but now, probably for a few quarters at most, cash given the unfavorable cross currents, this was probably seems to be a welcome different bet to add to the portfolio acceptable, but with disappointing absolute losses. Seen in lieu of our overweighting in regular government in the broader context of the 2½ year decline though, all bonds. of the above are deep in the pinch-me-am-I-awake outperformance zone.

Japan Japan remains the great and dangerous enigma. There are Conclusions signs at last of more serious corrective action being We are well aware that we are entering a difficult period seriously considered. This is the necessary first step. where our most likely error, as we have said for 2 years Andrew Smithers has argued for 10 years that without a or more, will be investing too early in equities that real crisis Japan will never take serious steps. In the although already cheap, continue to fall in price – the meantime, the market is at a 19-year low yet, perversely, reciprocal of the 1997-2000 situation. The problem is that it is by far the least hurt of the major stock markets this the overrun phase is once again a greater fool year. Our decision to neutral weight Japan by reason of its phenomenon and we prefer to make good value bets on a intrinsic uncertainties has worked well this year, freeing 7-year horizon. However, we have learned that some our time and our risk units for more dependable bets. inertia is a good idea and we always move slowly in asset allocation. Having said this, our early reductions in fixed GMO’s Third Quarter Performance income during the year have reduced our outperformance The third quarter, unlike the first two, was far from a in asset allocation. To do the alternative, which is to bet piece of cake, even the hard to eat relative piece of cake. on a certain degree of overrun, is to trade off a hunch GMO’s relative performance, given the unfavorable (even a likely hunch based as it is on historical trends, was good in foreign, modestly good in asset observation) against the near certainty of eventual mean allocation, a disappointing draw in US equities, and a loss reversion. This is what we propose to do: we will move in emerging equities. International intrinsic value into equities as they pass fair value but we will do it outperformed by 4.9% for the quarter (over +16% year- slowly. Before we overweight equities materially, we will to-date), asset allocation (global balanced) outperformed wait for stock prices to undershoot by our usual 1+ by 2.7% (over +12% year-to-date), US Core eked out a standard deviations, during which time we will stay close disappointing +0.1% (+1.6 year-to-date) and emerging to the benchmark.

Past performance is not indicative of future performance.

3 GMO Quarterly Letter – October 2002 GMO Special Topic October 2002 Jeremy Grantham, Chairman Feet of Clay Alan Greenspan’s Contribution to the Great American Equity Bubble —Part 1 in a Series on The Great American Equity Bubble— Introduction: What Is the Fed Chairman’s Job Description? the amount of greed that is in any case in plentiful supply In its earlier years, the Fed’s emphasis seems to have been in a vigorous capitalist system. This in turn increases on economic activity, a reasonable response to the high corruption a little and unethical behavior a lot. Bubbles unemployment of the 1930s and the fears of a post World also redistribute wealth. Much of it goes temporarily to War II depression. By the nineties, the heavy emphasis stockholders and is later given back. But while it is there, had transferred to inflation control following the pain of the unexpected wealth changes behavior. It increases the high inflation years from 1973 to 1983. Both of these consumption that further boosts the economic side of the factors were emphasized when they seemed to be critical bubble and hence corporate profits and share prices. By to stability, and I believe that the underlying job of the the same token, it will reduce saving and the flow of Fed probably is, and certainly should be, the maintenance funds into retirement plans, which seem in the bubble to of general economic stability. be doing so well from capital gains that they need no further help from incremental savings. When the market Nothing threatens economic stability more than the tide recedes, the retirement funds will be revealed as deflating of a major stock market bubble, particularly this inadequate and will be several years of low savings time when there was a chance of global deflations even behind the game. The loss of this fools’ paradise will before the bubble broke. This severe risk brushes aside cause resentment. the argument that bubbles are hard to detect, for the stakes are just too high not to try; great bubbles are, in Most of the redistribution of wealth these days will end any case, like mountains sticking out of the plain of up in the hands of corporate managers, particularly in this normal stock prices. Comparing 36 times earnings to a cycle where they have been the beneficiaries of stock previous 1929 high of 21 and a 75-year average of 14 options to a remarkable degree. Stock options in this times would not seem to take particularly sharp analytical cycle have not been effectively tied to good performance, skills. The potential dangers overwhelm Greenspan’s and most stock option wealth has been awarded at defense that the techniques to resist bubbles are not precisely those companies where shareholders have been certain, for what in economics is certain? The stability of most hurt. Under the influence of the great wealth created the US economy can only be protected against the real by options, some managers and their accountants crossed dangers of a bubble breaking by the Fed and its Chairman from the grey area into outright illegality. All of this will being willing, at rare intervals, to take some substantial be resented in the aftermath of the bubble. In general, the political risks. They must attempt to identify and size of the ‘bezzle’ – as Galbraith called the weasel moderate major stock bubbles and be prepared to bear factor – will increase in a bubble, and investors, workers, some consequences. If they are not prepared to do this, and of course belated politicians, who had done little then the risk level of the economy will rise substantially. proactively, will jump to correct or over correct the problems.

Setting the Scene The downside of the great bull markets will in fact always Major stock market bubbles are indeed about the most prove to be a paradise for Murphy’s Law: whatever can dangerous thing that can happen to an economy. They go wrong will pick this time to do it. The over investment cause wasteful over investment in hot areas. Through the caused by excessive stock prices and excessive lending vast paper wealth they create, they substantially increase will be followed by a capital spending bust. An investing public who feels to some extent betrayed will lose bubble could be limited by policy and replied: “From the confidence in investing. The excessive lending that was evidence to date, the answer appears to be no.” But what facilitated by high stock prices will tend to dry up as will evidence did he offer? Since he did not try any of the foreign investment that was encouraged by both rising above, there is precious little evidence that his case was stock prices and a booming economy in the US. Many of valid. But the circumstantial evidence that strong action these factors will interact and it will always be impossible would have indeed been effective is quite substantial. to know how badly things will work out. Certainly, stock When he was not the one dodging bullets, Greenspan prices themselves have always over corrected below their himself had a very different view as to the responsibilities trend-line value. For all these reasons bubbles should be of the Federal Reserve and what it could achieve. In 1966 avoided at any reasonable cost. It will be worth taking he had written scathingly of the consequences of weak-some risks with the economy and some career risk to kneed behavior by the Fed in 1928 and the dire decrease the chances of a major bubble forming. The consequences of delayed and weak action for everyone in person in the best position to take effective action is the the ensuing crash. He wrote in his chapter in Ayn Rand’s Fed Reserve Boss, Alan Greenspan. The purpose of this Capitalism: The Unknown Ideal: “When business in the article is to ask how he did and give him a scorecard.

United States underwent a mild contraction in 1927, the Federal Reserve created more paper reserves in the hope Did He See the Bubble Coming and What Could He Do? of forestalling any possible bank reserve shortage. The excess credit which the Fed pumped into the economy There were many contributory factors to the building and spilled over into the stock market - triggering a fantastic bursting of the 1995-2000 bubble, by far the largest and speculative boom. Belatedly, Federal Reserve officials most important in American history. Many things were attempted to sop up the excess reserves and finally done badly or left undone, but I believe the facts and succeeded in breaking the boom. But it was too late: by common sense indicate that the single largest contributor 1929 the speculative imbalances had become so to our present problem was indeed Alan Greenspan, for overwhelming that the attempt precipitated a sharp only he had the power to head off or reduce the equity retrenching and a consequent demoralizing of business bubble. confidence.

As a result, the American economy Greenspan could have raised rates a little back in 1996 collapsed…” He is clearly blaming the Fed for both the and added a lot of jawboning about determination to boom and the resulting crash. prevent an asset price bubble. Most obviously, perhaps, J.K. Galbraith, with presumably no axe to grind, having he could have increased margin requirements. Had studied the last great equity bubble of the late twenties for Greenspan been prepared to use all the tools available and his book The Great Crash (John Kenneth Galbraith, The shown his determination, it almost certainly would have Great Crash, 1929, pp. 189-194, New York, Mariner, worked and cut the last substantial piece off the upswing 1997), concluded his analysis with a resounding vote that and offsetting downswing in the US equity market. In the Federal Reserve did indeed have the tools to prevent addition, it would have reduced the over investment, a major bubble but argued presciently it seems that such greed, and corruption that go with a truly major bubble. tools would never be used!

He argued “that the chance for While I’ve been trying to marshal my thoughts on the recurrence of a speculative orgy (like that leading up to Greenspan fiasco, he has overtaken my efforts with his 1929) remains good. No one can doubt that the American breathtakingly shameless and complete denial of people remain susceptible to the speculative mood … The responsibility for the bubble at Jackson Hole in late government preventatives and controls are ready. In the August this year. hands of a determined government their efficacy cannot be doubted. There are, however, a hundred reasons why a According to Greenspan, jawboning the market “would government will determine not to use them … Action to have been ineffective unless backed by action.” We can break up a boom must always be weighed against the agree on that one. He claimed that the belief that “well- chance that it will cause unemployment at a politically timed incremental tightening” of rates could have inopportune moment.

It will always look, as it did to the succeeded against “the late 1990s bubble is almost surely frightened men on the Federal Reserve Board in February an illusion.” Even more controversially, he argued that 1929, like a decision in favor of immediate as against increasing the margin requirement would also have had ultimate death. As we have seen, the immediate death not little effect. He further asked whether even the size of the only has the disadvantage of being immediate but of GMO 2 Feet of Clay, October 2002 identifying the executioner … One might expect that … increasing enthusiasm for the new economy, its new high The Federal Reserve would be asked by bankers and plateau of productivity, profitability and growth, and its brokers to lift margins to the limit … The public would be justification for higher stock prices. Greenspan, though, warned sharply and often of the risks inherent in buying was not selling shares and yet he seems to have believed stocks for the rise … all this might logically be expected. more completely in this new era nonsense by March 2000 However, it did not happen in the go-go years of the late than anyone else.

(What an unfortunate coincidence that sixties … nor will it ever come to pass … Long-run the title of ‘most credulous’ and the title of Federal salvation by men of business has never been highly Reserve Chairman belong to the same man.) regarded if it means disturbance of orderly life and Some elements of the conflict between his earlier views convenience in the present. So inaction will be advocated and later wishful thinking can be seen in the carefully in the present even though it means deep trouble in the hedged use of language in the great Jackson Hole Denial future … It is what causes men who know that things are of Responsibility. “It is very difficult to definitely identify going quite wrong to say that things are fundamentally a bubble until after the fact.” Of course it is difficult to sound.”

This unfortunately for everyone sounds all too definitely identify a bubble, although he himself had like the present Fed Reserve Boss. claimed in September 1996 to have identified one, and Greenspan himself back in 1996, when the market at even now he confesses to “strongly suspecting” that one under half its final price was already irrational in his eyes, existed then. “No monetary tightening … can reliably lets on that a bubble can indeed be broken. Paul Krugman deflate a bubble,” he went on. No, of course monetary recently pointed out Greenspan’s remarkable September tightening would not have ‘reliably’ worked, but together 1996 statement to fellow Open Market Committee with jawboning and increased margin requirements colleagues, “I recognize that there is a stock market (which he claimed to know would work), it very probably bubble problem at this point. We do have the possibility would have worked.

The consequences of a bubble of increasing margin requirements. I guarantee that if you breaking are also not definitively or reliably known, but want to get rid of the bubble, whatever it is, that will do are typically severe. In any responsible job dealing with it.” This is only one of several smoking guns. the soft sciences of economics and finance, certainty is too high a hurdle. His job is to do the best he can with So despite believing that bubbles were dangerous and uncertainties, and in this he failed and failed badly. delay potentially ruinous, despite knowing that he had the tools to break it, and despite sensing back in 1996 -probably with perfect timing the time to act - he did not What Was in His Head? act, leaving us to face the painful consequences, one of Greenspan’s vacillation and change of heart may have the worst of which is being forced to listen to his excuses involved some woolly thinking, although it is hard to and to see the willingness of so many acolytes to nod separate woolly thinking from a tendency to change agreement. arguments to fit the politically convenient position.

There are two prime examples. First, his view of market Why did Greenspan not follow through after “irrational efficiency. His 1966 view is that excesses or bubbles do exuberance?” Galbraith probably had it nailed. No one indeed exist and can be identified and acted on. After wants to be the one caught “holding the pin.” No one having his head slapped by congressmen for his looks forward to taking a lot of political heat and we ‘irrational exuberance’ miscalculation, he hurriedly know that Greenspan took a good deal because of moves to cover his tail by adopting a view that the market “irrational exuberance.” Hesitating under that pressure is is efficient: “to spot a bubble in advance requires a reasonable, and hesitation in dealing with a bubble has judgment that hundreds of thousands of investors have it been likened to jumping off a London bus as it all wrong.”

Yet his suspicions in his earlier 1996 accelerates. It is at first an unpleasant proposition, but as statement did sound like flat-out belief in an inefficient soon as you delay it becomes just plain dangerous. At market. Now in the summer of 2002 he returns to his such times, wishful thinking becomes an appealing earlier view: “history attests, investors too often proposition, and Greenspan seems genuinely to have exaggerate the extent of the improvement in economic been deep into wishful thinking. As a believer in the new fundamentals. Human psychology being what it is, era, only a few sell-side strategists such as Goldman bubbles tend to feed on themselves and booms in later Sachs’ Abbey Cohen and Lehman Brothers’ Jeff stages are often supported by implausible projections of Applegate ran him a close second for relentless and potential demand.” “Implausible projections!”

Here he Feet of Clay, October 2002 3 GMO sounds like a behavioralist who believes the market is a pet. “Lofty equity prices,” he said, “have reduced the cost dangerous jungle of psychological impulse! of capital. The result has been a veritable explosion of spending on high-tech equipment … And I see nothing to His other remarkable intellectual woolliness regards the suggest that these opportunities will peter out anytime cost of capital. His new defense includes an apparent soon … Indeed many argue that the pace of innovation belief that productivity improvements might permit will continue to quicken … to exploit the still largely corporate profits to rise at a rate that would have justified untapped potential for e-commerce, especially the the new high stock price. This is a common enough error, business-to-business arena.” All this within one week of but an oddly amateurish one for Greenspan.

If indeed the peak from which the Nasdaq’s “lofty prices” declined profit margins, and hence return to corporations, had by 75% and the business-to-business sub index fell by improved in a permanent way, then return to stockholders over 95%! must also improve - and this only occurs with lower stock prices and higher yields, not higher prices. This counter- The economic basis for his enthusiasm always looked intuitive result is only the same as saying that the cost of shaky. Not that the economy and productivity were not capital must be in balance with the return to capital. doing well. They were much better than the seventies, Without this balance, there is set up a classic capitalist eighties, and early nineties. It simply did not seem to be arbitrage. If the return to stocks is higher than the return as good as Greenspan believed.

Skeptics argued, for to corporate investment, then no company will invest but example, that hedonic inflation adjustment, which argued simply buy cheaper assets in the stock market until a that four times the speed in a computer was equivalent to shortage of new assets drives up corporate returns. a 75% reduction in real prices, was unrealistic. It added Conversely, if it is less, then corporations will raise new some ½% a year to productivity and was not used by capital by selling expensive shares and invest in new many perfectly serious countries. Too much of the plant (shades of the telecom boom), bidding down the productivity gains came from an unsustainable boom in returns on new investment until the system is in balance. capital equipment for technology. Productivity was Greenspan’s logic would fail a Finance 101 final! calculated per person, not per hour, and Americans and Brits were alone in working longer in the nineties as they Greenspan: the Great Promoter got richer.

The rest of the developed world quite sensibly With Galbraith’s help, it is easy to understand how a worked less. This list of earlier challenges to the validity politically minded Federal Reserve Chairman would of the new economy is just a sample. In short, for many avoid taking decisive action against an asset class bubble. of us, the case for a permanent and significant We can even understand that his muddled thinking on improvement was possible but absolutely not proven, and several issues would not have helped him be decisive. the degree of improvement was seen as entirely unlikely Much harder to understand, though, are his statements of to rival Greenspan’s vision. bullishness about the economy. Given his stated Whatever Greenspan’s motives for voicing his misgivings and “suspicions” on the probability of a enthusiasm for the new economy, we know what its effect bubble, why would he frequently make the most was.

It removed reasonable doubt for most investors. The extravagantly optimistic statements about the new Financial Times, who incidentally get the award for least economy to a broad public? Given his status, did he not boot-licking of the major papers regarding Greenspan expect this to be used as fuel for the fire? Did he not over the last 5 years, pointed out that his “increasingly realize it would encourage precisely the “exaggeration” bullish observations … may well have contributed to the of economic progress he now blames for the bubble? Did explosion of exuberance in the late 1990s.” Morgan he really see this as being in his job description whereas Stanley’s economist, Stephen Roach went further, controlling an asset class bubble was not? arguing that Greenspan’s outspoken belief in the unique It is worth reminding ourselves of the extravagance of features of this cycle – rapid growth yet low inflationary some of his statements.

In January 2000, for example, he pressure – removed the need to raise interest rates. “That claimed that “the American economy was experiencing a was the buy signal every investor and speculator dreamed once-in-a-century acceleration of innovation, which of.” propelled forward productivity, output, corporate profits Summary and stock prices at a pace not seen in generations, if In the end, what Greenspan faced was not a moral ever.” Phew! The internet, which had “pushed back the dilemma. The morality was clear. He had the knowledge, fog of uncertainty” for corporations, was his particular experience, and belief and failed to act. What he had was GMO 4 Feet of Clay, October 2002 a career dilemma. If he jumped off the moving bus early, reputation without a realistic hope of offsetting rewards he would have taken some considerable grief. If the simply because it was the right thing to do would have economy had slowed, he would have been blamed.

The taken very high ethical standards and considerable timing of occasional ordinary recessions is not of vital strength of character. Paul Volker perhaps might have importance to society. Indeed, an occasional moderate made that choice. recession may be necessary for a healthy economy in the As for Greenpan’s recent defense, in the end what did we long run, although you could find economists who would expect? That he would repent his lack of character? That argue the other side. The real cost to society comes from he would admit even partial fault? His complete denial on the corruption, disappointments, reduced savings, and the this regard brings to mind an incident in the Profumo sex wasted investments brought on by a bubble. The timing scandal of the 1960s in England. One of the women of recessions is, however, of real importance to involved, Mandy Rice Davis, on hearing that the politicians who want to be re-elected and who face an government minister had denied having sex with her, electorate whose view of their political platforms is often replied with the immortal words, “Well he would say that, a simple, “It’s the Economy, Stupid!”

In Greenspan’s wouldn’t he?” Sometimes the blindingly obvious is defense, we can agree he would have received little or no funny. This time the equally predictable denial of thanks for preventing the evils of a boom and bust for it responsibility and the apparent credulousness of many could never be proved. What we do know is the world’s opinion makers (but encouragingly not all of them) in willingness to believe that things would work out well accepting his argument are merely irritating. despite the bubble. So if he had acted, his reputation and career would have suffered at least temporarily. If he had Irritating or not, it must be conceded that in terms of engaged in wishful thinking, he could believe that there avoiding blame he appears to have mostly gotten away would be either a chance that things would muddle with it.

You can indeed ‘fool most of the people all of the through or a chance that his denials of responsibility, time.’ ‘Most of the people’ this time probably included muddled and contradictory as they are, would suffice. For Her Majesty who recently knighted him for his global a Federal Reserve boss to have volunteered to have taken services. My secret hope though is that she justified it by a lot of political heat and certain short-term damage to his having had a good short position for the last 3 years.

Feet of Clay, October 2002 5 GMO