AINDA ACERCA DA INUTILIDADE DA MATEMÁTICA

Na entrevista com Alan Greenspan que ontem comentei, repeti  aqui o meu espanto com a implícita absolvição, que decorre da imputação das responsabilidades da crise à falibilidade dos modelos económicos, daqueles que montaram esquemas com que enganaram meio mundo, dinamitaram o sistema, e encheram os seus bolsos, e que nenhum modelo económico ou avaliação antropológica, psicológica ou outra poderia contemplar porque exorbitam das áreas científicas por serem do foro criminal.

Aliás, logo a seguir à violenta erupção da crise, mimosearam-se os economistas com acusações mútuas, sendo na oportunidade, naturalmente, mais empertigados os críticos das teorias ditas neoliberais, por serem supostamente os académicos os mentores das artes com que os banqueiros trapacearam meio mundo e colocaram as economias mais fragilizadas de patas para o ar. O testemunho de Greenspan, um liberal que enquanto jovem, frequentou o círculo ultra radical de Ayn Rand, alinha, deste modo, paradoxalmente, nas fileiras dos mais acirrados críticos das teorias que nortearam a sua carreira à frente da Fed, para abonação da conduta dos banqueiros.

Ainda assim, se são escassos os casos que até agora colocaram nos EUA alguns criminosos atrás das grades, dos quais Bernard Madoff foi o mais destacado, vários bancos foram multados (vd. artigo sobre o tema no Expresso/Economia de hoje) e muitos processos se encontram ainda pendentes de julgamento judicial. Considerando a relativa leveza das multas e a impunidade da generalidade dos autores dos crimes, os mecanismos financeiros subsistem propensos ao cometimento das mesmas fraudes sistémicas no futuro.

E em Portugal?
Nenhum dos contrafatores pagou nada, mas receberam muitos, presumidas vítimas de processos dolosos a que não aderiram ingenuamente. A uns e outros, banqueiros e cliente oportunistas, foram coagidos a pagar os contribuintes. Entretanto, sabe-se que o Ministério Público ainda existe pelas fugas de informação que fazem as delícias dos jornais e delegam as competências da administração da justiça na impotência da justiça popular.

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Correl . - «Os três principais administradores do Banco Privado Português (BPP) - João Rendeiro, Paulo Guichard e Fezas Vital -, receberam 6,4 milhões de euros em 2008, ano em que a instituição faliu. Só João Rendeiro, antigo presidente do conselho de administração, arrecadou 2,8 milhões, segundo uma tabela de vencimentos incorporada no processo de falência do banco, que corre no Tribunal do Comércio, em Lisboa. Os ordenados dos antigos administradores eram divididos em várias parcelas: salário-base, plafond de despesas, complemento "forex", prémio anual e outro plurianual.» (aqui)

ACERCA DA INUTILIDADE DA MATEMÁTICA

O Financial Times publica hoje (aqui) uma entrevista com Alan Greenspan, o homem que esteve à frente da Reserva Federal Americana entre 1987 e 2006, e que chegou a ser venerado como um mágico e cognominado de "maestro". Até ao dia em que a crise da "subprime" irrompeu, e abalou o sistema financeiro norte-americano, propagando-se em ondas que atravessaram o Atlântico e abateram as economias mais vulnerabilizadas de uma Zona Euro totalmente desprevenida de instrumentos de defesa adequados.

 

Cinco anos depois do espoletar da crise nos EUA, seis depois de ter abandonado o cargo onde o viram brilhar intensamente, Greenspan, que há já bastante tempo atrás tinha  admitido o erro, volta a reconhecer que a sua confiança, e a dos que trabalhavam na Fed, nos modelos matemáticos de previsão que utilizavam, ficou irremediavelmente comprometida com a emergência de uma crise de intensidade que não tinha previsto.

 

Diz Greenspan que, assim como foi excessiva a admiração que lhe tributaram durante os quase 20 anos que presidiu à Fed, são desproporcionadas as culpas que, na ressaca da crise, lhe passaram a atribuir. A Fed é governada por um conjunto relativamente vasto de personalidades indigitadas por instituições governamentais e privadas, servido por um quadro técnico que compreende, além do mais, 250 economistas doutorados, especializados na monitorização e previsão económica.

 

Erraram todos?

Greenspan considera que foi dado demasiado crédito aos modelos matemáticos econométricos e subalternizados outros instrumentos de avaliação que recorrem aos avanços em outras áreas do conhecimento, nomeadamente a antropologia e a psicologia, citando, a propósito, os contributos de vários académicos , e de entre eles,  Daniel Kahneman, um psicólogo, Prémio Nobel da Economia em 2002.

 

Aos 87 anos, Greenspan publica mais um livro - "The Map and the Territory" - uma reflexão sobre o risco, a natureza humana e o futuro das previsões do futuro. A entrevista é, deste modo, uma promoção desta obra. Que, previsivelmente, será um best seller, porque o maestro pode enganar-se por conta alheia mas, certamente, não se enganará por conta própria.

 

Acabo de ler a entrevista, e fico, mais uma vez, espantado com a implícita absolvição, que decorre deste reconhecimento da falibilidade dos modelos económicos, daqueles que montaram esquemas com que enganaram meio mundo, dinamitaram o sistema, e encheram os seus bolsos, e que nenhum modelo económico ou avaliação antropológica, psicológica ou outra poderia contemplar porque exorbitam das áreas científicas por serem do foro criminal.

 

Porquê?

Porque, de outro modo, o sistema teria de ser inteiramente reformulado e os intervenientes no astronómico logro, julgados e sancionados. Mas eles são demasiadamente influentes para serem seriamente perturbados. Por isso tudo continuará sensivelmente mais ou menos na mesma até à próxima explosão do vulcão temporariamente acalmado.

ERROS DE GREENSPAN

Greenspan and Democracy

Robert Reich

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Alan Greenspan, writing in the current issue of the Economist, argues that in the future banks will need more of a capital cushion than they needed before the crisis because holders of bank liabilities will require them to hold more capital. "Today, fearful investors clearly require a far larger capital cushion to lend" to financial intermediaries. In other words, there's no need for additional regulations requiring banks to have more capital. The financial market will take care of itself. Greenspan has learned nothing at all.In 2004 and 2005, when many economists warned that a speculative bubble in home prices and home construction posed a risk to the financial system, Greenspan brushed aside such worries, saying housing prices never declined. Before that he had resisted calls for tighter regulation of subprime mortgages and other instruments which allowed people to borrow far more than they could afford. He had also opposed tougher regulation of derivatives. Almost a decade earlier, Greenspan had urged Congress to knock down the regulatory walls that separated investment and commercial banks, thereby inviting investment banks to place huge bets with other peoples’ money.Barely two months ago, when Greenspan appeared before Congress to explain what had happened to the economy, Representative Henry Waxman asked him pointedly: "Were you wrong?""Partially," Greenspan responded. "This crisis has turned out to be much broader than anything I could have imagined."

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more

OOPS

INTERVENÇÃO LIBERAL

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Repel the calls to contain competitive markets

By Alan Greenspan
Published: August 4 2008

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The surprise of recent months is not that global economic growth is slowing, but that there is any growth at all. The credit crunch of the past year has not followed the path of recent economically debilitating episodes characterised by a temporary freezing up of liquidity – 1982, 1989, 1997-8 come to mind. This crisis is different – a once or twice a century event deeply rooted in fears of insolvency of major financial institutions.
This crisis was not brought to closure by the world’s central banks’ injection of huge doses of short-term liquidity. Only when sovereign credits were substituted for private bank credit, first in the case of the UK (Northern Rock) and subsequently in the case of the US (Bear Stearns), was a semblance of stability restored to markets. But the London Interbank Offered Rate spreads on overnight index swaps and credit default swaps of financial institutions have not returned to the modest pre-crisis levels. Fears of insolvency have not, as yet, been fully set aside. There may be numbers of banks and other financial institutions that, at the edge of defaulting, will end up being bailed out by governments.
The insolvency crisis will come to an end only as home prices in the US begin to stabilise and clarify the level of equity in homes, the ultimate collateral support for much of the financial world’s mortgage-backed securities. However, US home prices will stabilise only when the absorption of the huge excess of single-family vacant homes that emerged as the US housing boom peaked in 2006 is much further advanced than it is now. New single-family home completions are currently barely under the rate of home demand generated by household formation and replacement needs. Only later this year will the current suppressed level of housing starts be reflected in completion levels consistent with a rapid rate of liquidation of the inventory glut, and this, of course, assumes that current levels of demand for housing hold up.
Pending that outcome, the price of equities worldwide will determine whether the international financial system can maintain a modicum of stability as it eases out of its credit crunch, or falls back into another period of angst and turmoil.
The optimistic case rests on the business world beyond finance. Given this past year’s vast impairment of financial intermediation, nonfinancial corporate business has held up surprisingly well, contributing to a flow of corporate earnings that has helped sustain a stressed global stock market. To be sure, global stock prices are off a fifth from their October 2007 peaks, but still hover at levels last seen in 2006, a demonstrably less fear-ridden period than currently prevails.
A sustained level of global equity prices will be critical if banks are to recapitalise themselves at the higher levels daunted investors now require. The pool of capital is being augmented by a reasonably high level of saving (nearly 24 per cent of world gross domestic product), up significantly from earlier this decade. The flow of new saving will provide some support.
Capital gains, however, are just as important. This can best be observed in the context of the consolidated balance sheet of the world economy. All debt and derivative claims offset in global accounting, leaving real physical and intellectual assets and their market value reflected as net worth. Capital gains cannot finance new physical investment, but do add to global net worth. If, for whatever reason, discounting of prospective future earnings engendered by the world’s physical capital stock declines, the market value of that capital stock rises with no offsetting liability. There is accordingly a larger value of equity shoring up the capital of financial or nonfinancial businesses. Should that discount rate reverse, the value of world equity will fall. Consequently, lower global stock prices could impede the recapitalisation of banks and other financial institutions. Debt issuance would also be suppressed as it leverages off the level of equity.
Globalisation is at the root of the past decade’s unprecedented surge in world economic activity. The growth in the volume of global trade has far exceeded the pace of world real GDP growth for decades. Between 2001 and 2007 global cross-border investments (at market values) rose almost two-thirds faster than world nominal GDP, according to data from the International Monetary Fund.
The economic edifice – market capitalism – that has fostered this expansion is now being pilloried for the pause and partial retrenchment. The cause of our economic despair, however, is human nature’s propensity to sway from fear to euphoria and back, a condition that no economic paradigm has proved capable of suppressing without severe hardship. Regulation, the alleged effective solution to today’s crisis, has never been able to eliminate history’s crises.
A financial crisis is heralded, in fact defined, by sharp discontinuities of asset prices. The crisis must thus be unanticipated. The fact that risk was heavily underpriced for much of this decade was broadly recognised in the financial community, but the timing of the sharp price correction was nonetheless a surprise.
Recent history is replete with such underpricing persisting for years. Those market players who withdraw from “long” commitments at the first sign of an excess of exuberance, risk losing market share. They thus continue “to dance” as Chuck Prince, the former Citigroup chairman put it, but always assume they will have time to exit the markets. The vast majority invariably fail. When the current crisis emerged, it was assumed that the weak links would be unregulated hedge and private funds. The losses, however, have been predominately in the most heavily regulated institutions – banks.
We may not easily confront or accept the price dynamics of home and equity prices, but we can fend off cries of political despair which counsel the containment of competitive markets. It is essential that we do so. The remarkably strong performance of the world economy since the near universal adoption of market capitalism is testament to the benefits of increasing economic flexibility.
It has become hard for democratic societies accustomed to prosperity to see it as anything other than the result of their deft political management. In reality, the past decade has seen mounting global forces (the international version of Adam Smith’s invisible hand) quietly displacing government control of economic affairs. Since early this decade, central banks have had to cede control of long-term interest rates to global market forces. Previously heavily controlled economies – such as China, Russia and India – have embraced competitive markets in lieu of bureaucratic edict. The danger is that some governments, bedevilled by emerging inflationary forces, will endeavour to reassert their grip on economic affairs. If that becomes widespread, globalisation could reverse – at awesome cost.
The writer is the former chairman of the US Federal Reserve
Copyright The Financial Times Limited 2008

O DILEMA DOS BANCOS CENTRAIS

É frequente afirmar-se que BCE e Fed se distinguem pela restrição das atribuições do primeiro, que se limitam à contenção da inflação, e pela maior amplitude das atribuições do segundo que deve conciliar a travagem dos preços com o crescimento económico. A crítica parecia pertinente até ao momento em que o fantasma inflacionista espreita e o crescimento desmaia. Que pode fazer nestas ocasiões a Reserva Federal dos EUA? É o que vão discutir hoje e amanhã os 12 membros da FOMC (Federal Open Market Comission), dos quais 5 são presidentes dos bancos centrais regionais. Compete à FOMC decidir a política monetária do país.

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A actual organização da Fed vem de 1913 quando o Congresso, receando a concentração do poder financeiro em Washington ou Nova Iorque, criou bancos regionais abrangendo todos os EUA. Bernanke, o actual presidente da Fed, tem por hábito ser o último a usar da palavra nas reuniões da comissão. O seu antecessor, Greenspan, falava em primeiro lugar de modo a influenciar no sentido que pretendia os votos dos restantes membros. O temperamento de Bernanke numa conjuntura caracterizada por inflação à vista e a economia débil, dá fôlego às opiniões contrárias e, nomeadamente, dos governadores regionais da Fed. Estes são eleitos pelos banqueiros e homens de negócios da região, que privilegiam normalmente a contenção da inflação.

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Quando a inflação está em crescendo ou a economia em queda, as diferenças de opinião entre os membros da comissão, quando existem, são de pormenor. Quando, porém, como na situação actual os dois males ocorrem em conjunto, as divergências emergem.

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Durante os últimos 10 meses Bernanke cortou a taxa de juro de intervenção da Fed com o objectivo claro de espevitar a economia e evitar uma depressão profunda. Mas pelo menos um membro da comissão votou contra nas últimas sete reuniões e outros dois fizeram o mesmo nas duas reuniões mais recentes. Vários membros vêm repetidamente argumentando que a inflação é uma ameaça em crescendo que tem de ser prioritariamente atacada. Richard Fisher, o presidente da Fed em Dallas, enalteceu nos primeiros dias deste mês a forma como o presidente do BCE tem travado o crescimento da inflação na União Europeia, em nítido contraste com a política de Bernanke. O descontentamento dos governadores, à excepção do presidente da Fed de Nova Iorque, alarga-se à intervenção de Bernanke no sistema financeiro ao safar o Bear Stearns, à beira da falência.

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Tudo conjugado, da reunião em curso deverá sair a notícia da não alteração da actual taxa de 2 por cento e o aviso à navegação que para a próxima poderá haver subida porque a inflação começa a ser muito preocupante.

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Razão tem Trichet. Quando chega a hora da verdade, há diferenças em quê?

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more: http://www.washingtonpost.com/wp-dyn/content/article/2008/06/23/AR2008062302174.html

FIM DO IMPÉRIO?

IN BAD COMPANY
The Old Titans All Collapsed. Is the U.S. Next?
By Kevin PhillipsSunday, http://www.washingtonpost.com/wp-dyn/content/article/2008/05/16/AR2008051603461.html

Back in August, during the panic over mortgages, Alan Greenspan offered reassurance to an anxious public. The current turmoil, the former Federal Reserve Board chairman said, strongly resembled brief financial scares such as the Russian debt crisis of 1998 or the U.S. stock market crash of 1987. Not to worry.
But in the background, one could hear the groans and feel the tremors as larger political and economic tectonic plates collided. Nine months later, Greenspan's soothing analogies no longer wash. The U.S. economy faces unprecedented debt levels, soaring commodity prices and sliding home prices, to say nothing of a weak dollar. Despite the recent stabilization of the economy, some economists fear that the world will soon face the greatest financial crisis since the 1930s.
That analogy is hardly a perfect fit; there's almost no chance of another sequence like the Great Depression, where the stock market dove 80 percent, joblessness reached 25 percent, and the Great Plains became a dustbowl that forced hundreds of thousands of "Okies" to flee to California. But Americans should worry that the current unrest betokens the sort of global upheaval that upended previous leading world economic powers, most notably Britain.
More than 80 percent of Americans now say that we are on the wrong track, but many if not most still believe that the history of other nations is irrelevant -- that the United States is unique, chosen by God. So did all the previous world economic powers: Rome, Spain, the Netherlands (in the maritime glory days of the 17th century, when New York was New Amsterdam) and 19th-century Britain. Their early strength was also their later weakness, not unlike the United States since the 1980s.
There is a considerable literature on these earlier illusions and declines. Reading it, one can argue that imperial Spain, maritime Holland and industrial Britain shared a half-dozen vulnerabilities as they peaked and declined: a sense of things no longer being on the right track, intolerant or missionary religion, military or imperial overreach, economic polarization, the rise of finance (displacing industry) and excessive debt. So too for today's United States.
Before we amplify the contemporary U.S. parallels, the skeptic can point out how doomsayers in each nation, while eventually correct, were also premature. In Britain, for example, doubters fretted about becoming another Holland as early as the 1860s, and apprehension surged again in the 1890s, based on the industrial muscle of such rivals as Germany and the United States. By the 1940s, those predictions had come true, but in practical terms, the critics of the 1860s and 1890s were too early.
Premature fears have also dogged the United States. The decades after the 1968 election were marked by waves of a new national apprehension: that U.S. post-World War II global hegemony was in danger. The first, in 1968-72, involved a toxic mix of global trade and currency crises and the breakdown of the U.S. foreign policy consensus over Southeast Asia. Books emerged with titles such as "Retreat From Empire?" and "The End of the American Era." More national malaise followed Watergate and the fall of Saigon. Stage three came in the late 1980s, when a resurgent Japan seemed to be challenging U.S. preeminence in manufacturing and possibly even finance. In 1991, Democratic presidential aspirant Paul Tsongas observed that "the Cold War is over. . . . Germany and Japan won." Well, not quite.
In 2008, we can mark another perilous decade: the tech mania of 1997-2000, morphing into a bubble and market crash; the Sept. 11, 2001, terrorist attacks; imperial hubris and the Bush administration's bungled 2003 invasion of Iraq. These were followed by OPEC's abandoning its $22-$28 price range for oil, with the cost per barrel rising over five years to more than $100; the collapse of global respect for the United States over the Iraq war; the imploding U.S. housing market and debt bubble; and the almost 50 percent decline of the U.S. dollar against the euro since 2002. Small wonder a global financial crisis is in the air.
Here, then, is the unnerving possibility: that another, imminent global crisis could make the half-century between the 1970s and the 2020s the equivalent for the United States of what the half-century before 1950 was for Britain. This may well be the Big One: the multi-decade endgame of U.S. ascendancy. The chronology makes historical sense -- four decades of premature jitters segueing into unhappy reality.
The most chilling parallel with the failures of the old powers is the United States' unhealthy reliance on the financial sector as the engine of its growth. In the 18th century, the Dutch thought they could replace their declining industry and physical commerce with grand money-lending schemes to foreign nations and princes. But a series of crashes and bankruptcies in the 1760s and 1770s crippled Holland's economy. In the early 1900s, one apprehensive minister argued that Britain could not thrive as a "hoarder of invested securities" because "banking is not the creator of our prosperity but the creation of it." By the late 1940s, the debt loads of two world wars proved the point, and British global economic leadership became history.
In the United States, the financial services sector passed manufacturing as a component of the GDP in the mid-1990s. But market enthusiasm seems to have blocked any debate over this worrying change: In the 1970s, manufacturing occupied 25 percent of GDP and financial services just 12 percent, but by 2003-06, finance enjoyed 20-21 percent, and manufacturing had shriveled to 12 percent.
The downside is that the final four or five percentage points of financial-sector GDP expansion in the 1990s and 2000s involved mischief and self-dealing: the exotic mortgage boom, the reckless bundling of loans into securities and other innovations better left to casinos. Run-amok credit was the lubricant. Between 1987 and 2007, total debt in the United States jumped from $11 trillion to $48 trillion, and private financial-sector debt led the great binge.
Washington looked kindly on the financial sector throughout the 1980s and 1990s, providing it with endless liquidity flows and bailouts. Inexcusably, movers and shakers such as Greenspan, former treasury secretary Robert Rubin and the current secretary, Henry Paulson, refused to regulate the industry. All seemed to welcome asset bubbles; they may have figured the finance industry to be the new dominant sector of economic evolution, much as industry had replaced agriculture in the late 19th century. But who seriously expects the next great economic power -- China, India, Brazil -- to have a GDP dominated by finance?
With the help of the overgrown U.S. financial sector, the United States of 2008 is the world's leading debtor, has by far the largest current-account deficit and is the leading importer, at great expense, of both manufactured goods and oil. The potential damage if the world soon undergoes the greatest financial crisis since the 1930s is incalculable. The loss of global economic leadership that overtook Britain and Holland seems to be looming on our own horizon.
Kevin Phillips is the author, most recently, of "Bad Money: Reckless Finance, Failed Politics, and the Global Crisis of American Capitalism."

EM DIA DAS MENTIRAS

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Em dia de mentiras

as bolsas recuperam nos EUA.

Cai o preço do petróleo em Nova Iorque e Londres.

O dólar recupera 1% contra o euro.

Em Lisboa a bolsa está a negociar em alta.

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Alan Greenspan prognosticava há dias que esta seria a pior crise depois da última grande crise, tendo o cuidado de sacudir a água do capote. Se já antes tinha quem o apontasse como o grande responsável pelo cenário que ele agora pinta, as acusações de que é alvo têm redobrado nos últimos tempos. Enganou ou enganou-se Alan Greenspan? Amanhã, virão os dias da verdade.

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Bolsas dos EUA sobem mais de 1% impulsionadas pelo sector financeiro

As praças norte-americanas seguiam a valorizar mais de 1% impulsionadas pelos anúncios de aumento de capital da Lehman Brothers e do europeu UBS que aumentaram a especulação de que as empresas financeiras vão controlar os prejuízos de crédito. O Dow Jones valorizava 1,21% e o Nasdaq ganhava 1,20%.

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Preço do petróleo negoceia abaixo dos 100 dólares em Londres e Nova Iorque

O preço do petróleo está a cair pela terceira sessão consecutiva e já negoceia abaixo dos 100 dólares por barril em Londres e em Nova Iorque, devido às previsões que apontam para uma subida das reservas norte-americanas pela 11ª vez em doze semanas.

Euro cai mais de 1% face ao dólar

A moeda única da Zona Euro seguia a desvalorizar mais de 1% face ao dólar, a maior queda de quase duas semanas, depois da UBS e da Lehman Brothers terem anunciado aumentos de capital.

BCP e Galp animam bolsa nacional

A praça de Lisboa seguia a negociar em alta animada pelas valorizações do Banco Comercial Português (BCP) e da Galp Energia, numa altura em que a Cimpor e a Jerónimo Martins impediam o PSI-20 de acompanhar a dimensão de ganhos dos índices europeus. A bolsa nacional subia 0,89%

AS FÍFIAS DO MAESTRO

Greenspan Stands His Ground
Ex-Chairman Says Fed Policies Didn't Cause Current Woes
http://www.washingtonpost.com/wp-dyn/content/story/2008/03/20/ST2008032003800.html?hpid=topnews

Alan Greenspan says global forces, not the Fed, were to blame for fueling the housing bubble. He also said that a market crisis was inevitable.

Greenspan said in his book released last year, ''The Age of Turbulence,'' that the subprime boom would boost home ownership and was "worth the risk."

By Steven MufsonWashington Post Staff Writer Friday, March 21,

Perhaps the Maestro composed some discordant notes after all.
The record of longtime Federal Reserve chairman Alan Greenspan -- worshipped by business leaders and dubbed "Maestro" in a 2000 biography by The Post's Bob Woodward -- is getting a critical look as his successor Ben S. Bernanke wrestles with problems that began on the Maestro's watch.

Many economists blame Greenspan for lax bank supervision and for keeping interest rates too low, too long from mid-2003 to mid-2004. That, the theory goes, fueled the housing bubble and spawned subprime and adjustable-rate mortgages for low-income people, vast numbers of whom can't make their payments now. Banks bought those mortgages in bundles that are worth far less than they originally were. That has led to big write-offs, shaking the entire financial system.

In an interview yesterday, Greenspan said the Fed wasn't to blame. He said that global forces beyond the control of the Federal Reserve had kept long-term interest rates low, fueling the housing bubble earlier this decade. "Those who argue that you can incrementally increase interest rates to defuse bubbles ought to try it some time," he said. "I don't know of a single example of when interest rate policy has been successful in suppressing gains in asset prices."
Regarding the current turmoil, Greenspan said that a market crisis was inevitable. "If it weren't the subprime crisis it would have been something else," he said. That is because an era was ending that had seen "disinflationary forces" from developing countries such as

China and a "protracted period" in which there was an "underpricing of risk."

Not all economists are ready to let the former Fed chairman off so easily.
Lee Hoskins, former president of the Cleveland Fed and Fed chairman from 1987 to 1991, says that to find "partial causes" of the credit turmoil, "you have to go back to the Fed's decision to push the federal funds rate down to 1 percent and leave it there for over a year." Hoskins says the Fed "made money very cheap, and we began to see the whole leveraging process we see today. The Fed has to take responsibility for some of that excessive growth."

Greenspan says that the Fed was worried about "corrosive deflation" at the time and that he saw that as a greater threat to the U.S. economy than a housing bubble. "There was a real serious concern about deflation," he said yesterday. "If you look at the notes of the Open Market Committee, the pressures were to go lower than 1 percent. There were no dissents." Bernanke, a member of the Fed board at the time, was also concerned about deflation.

Greenspan also argues that while the Fed has a lot of power over short-term rates, it has less influence over long-term rates, which he asserted were more important to housing prices. Even after the Fed starting raising short-term rates, long-term rates did not rise. He said that at the time "it became apparent that we lost control" of long-term interest rates "as did the

Bank of England and all the central banks. As a consequence, we had very little ability to put a brake on the rise in home prices."

But other economists say that the very low short-term rates made adjustable-rate subprime mortgages, those with the worst default rates, more attractive than they otherwise would have been. Hoskins also argues that low short-term rates fed excesses at investment banks, which relied heavily on overnight financing while lending long term. "I don't know what Bear Stearns was banking on. I guess that nothing bad would happen -- ever," Hoskins says.
Others reviewing the Greenspan era at the Fed say there is a difference between the way Greenspan reacted during sharp sell-offs of stocks and the way he reacted to the technology and housing bubbles.
Kenneth Rogoff, a Harvard economics professor and former chief economist at the International Monetary Fund, says that "the important point . . . is the philosophy of monetary policy that says 'you don't pay attention to asset prices when they are rising, only when they are falling.' " In reality, Rogoff adds, "if you cut interest rates when asset prices are in free fall, then when asset prices are rising while indebtedness is rising all over country, you need to raise rates. He actively chose not to do that."

Other economists fault Greenspan for his failure to closely regulate big banks. Alan Blinder, a Princeton University economics professor who was vice chairman of the Fed under Greenspan in the mid-1990s, says that the delay in raising rates in 2003-04 was a "minor blemish" on Greenspan's "stellar" record managing monetary policy. But Blinder says that he would give the former chairman "poor marks" for bank supervision, another key role of the Fed.

Blinder said that Greenspan "brushed off" warnings -- most notably from fellow Fed governor Ned Gramlich -- about mortgage abuses and dangers.
"Lending standards were being horribly relaxed, and the Fed should have done something about that, not to mention about deceptive and in some cases fraudulent practices," Blinder said. "This was a corner of the credit markets that was allowed to go crazy. It was populated by a lot of people with minimal financial literacy who were being sold bills of goods by mortgage salesmen."

Gramlich, who died last fall, proposed that the Fed send examiners into the consumer lending offices of Fed-regulated bank holding companies, which he said originated about 30 percent of subprime loans. In a speech last Aug. 31, Gramlich said "this whole subprime experience has demonstrated that taking rates down could have some real costs, in terms of encouraging excessive subprime borrowing." Moreover, he added, there was "a giant hole in the supervisory safety net. . . . It is like a city with a murder law but no cops on the beat."

Greenspan said that most of the subprime mortgages were originated by firms regulated by other agencies, but he adds, "In retrospect it was clearly a mistake" not to examine bank lending more closely. He said it was "very late in the game [that] we realized the size of the problem." He said that Gramlich had written him a note shortly before he died saying that if he had been more convinced, he would have pressed harder for action after Greenspan expressed doubts.

Greenspan has also been widely criticized for comments he made on Feb. 23, 2004, in which he encouraged homeowners to take out adjustable-rate mortgages, or ARMs. In a speech to the Credit Union National Association, Greenspan said that a Fed study showed that many homeowners would have saved tens of thousands of dollars over the previous decade if they had taken ARMs.
In fact,some people if homeowners had converted from ARMs to 30-year fixed-rate mortgages at that time, they might have avoided the repayment problems are now experiencing.

Greenspan said yesterday that he tried to correct those comments on March 2, 2004, less than a month later, in a

New York speech praising 30-year fixed mortgages. "If I am guilty of encouraging people to take out adjustable-rate mortgages, I am guilty for 30 days," he said.
In his memoir, "The Age of Turbulence," published last year, Greenspan made scant mention of the time bombs that were planted when he was still chairman.
"I was aware that the loosening of mortgage credit terms for subprime borrowers increased financial risk, and that subsidized home ownership initiatives distort market outcomes," Greenspan wrote.
But the former Fed chairman said that the subprime boom would boost home ownership and was "worth the risk." Greenspan said that "protection of property rights, so critical to a market economy, requires a critical mass of owners to sustain political support."
Although home ownership rose from about 64 percent to 69 percent from the early 1990s through the middle of this decade, many analysts say that they doubt that had much effect on U.S. popular support for a market economy.
Regarding the mounting levels of debt, encouraged in part by the low cost of borrowing, Greenspan said that he was "reluctant to underestimate the ability of most households and companies to manage their financial affairs."
Greenspan compared bankers immediately after the Civil War, who he said sought to back two-fifths of their assets with equity, to today's bankers, who "are comfortable with a tenth." Yet, he said, bankruptcy is less prevalent today than it was 140 years ago.
"Rising leverage appears to be the result of massive improvements in technology and infrastructure, not significantly more risk-inclined humans," he wrote. Quoting two 1956 articles in Fortune magazine

, alarmed by rising consumer short-term debt and mortgages, Greenspan noted that the magazine's grim forecasts did not come true. Economists worried that the ratio of household debt to household income was so high that it threatened families with delinquency and default, but, Greenspan said, assets and household net worth were rising faster than they knew.
"I do not recall a decade free of surges in angst about the mounting debt of households and businesses," he wrote. "Such fears ignore a fundamental fact of modern life: in a market economy, rising debt goes hand in hand with progress."
Blinder says: "It was not that Americans have too much credit card debt, which they do, or . . . that corporations are overleveraged, which they're probably not. It's not even that the typical American householder has a mortgage that's too big. But in that corner of the [mortgage] market, which turned out to be not such a small corner, a lot of bad practices were going on."

A CRISE SEGUNDO GREENSPAN

OU GREENSPAN TIRA O CAVALO DA CHUVA

We will never have a perfect model of risk
By Alan Greenspan http://www.ft.com/cms/s/0/edbdbcf6-f360-11dc-b6bc-0000779fd2ac.html

The current financial crisis in the US is likely to be judged in retrospect as the most wrenching since the end of the second world war. It will end eventually when home prices stabilise and with them the value of equity in homes supporting troubled mortgage securities.
Home price stabilisation will restore much-needed clarity to the marketplace because losses will be realised rather than prospective. The major source of contagion will be removed. Financial institutions will then recapitalise or go out of business. Trust in the solvency of remaining counterparties will be gradually restored and issuance of loans and securities will slowly return to normal. Although inventories of vacant single-family homes – those belonging to builders and investors – have recently peaked, until liquidation of these inventories proceeds in earnest, the level at which home prices will stabilise remains problematic.
The American housing bubble peaked in early 2006, followed by an abrupt and rapid retreat over the past two years. Since summer 2006, hundreds of thousands of homeowners, many forced by foreclosure, have moved out of single-family homes into rental housing, creating an excess of approximately 600,000 vacant, largely investor-owned single-family units for sale. Homebuilders caught by the market’s rapid contraction have involuntarily added an additional 200,000 newly built homes to the “empty-house-for-sale” market.
Home prices have been receding rapidly under the weight of this inventory overhang. Single-family housing starts have declined by 60 per cent since early 2006, but have only recently fallen below single-family home demand. Indeed, this sharply lower level of pending housing additions, together with the expected 1m increase in the number of US households this year as well as underlying demand for second homes and replacement homes, together imply a decline in the stock of vacant single-family homes for sale of approximately 400,000 over the course of 2008.
The pace of liquidation is likely to pick up even more as new-home construction falls further. The level of home prices will probably stabilise as soon as the rate of inventory liquidation reaches its maximum, well before the ultimate elimination of inventory excess. That point, however, is still an indeterminate number of months in the future.
The crisis will leave many casualties. Particularly hard hit will be much of today’s financial risk-valuation system, significant parts of which failed under stress. Those of us who look to the self-interest of lending institutions to protect shareholder equity have to be in a state of shocked disbelief. But I hope that one of the casualties will not be reliance on counterparty surveillance, and more generally financial self-regulation, as the fundamental balance mechanism for global finance.
The problems, at least in the early stages of this crisis, were most pronounced among banks whose regulatory oversight has been elaborate for years. To be sure, the systems of setting bank capital requirements, both economic and regulatory, which have developed over the past two decades will be overhauled substantially in light of recent experience. Indeed, private investors are already demanding larger capital buffers and collateral, and the mavens convened under the auspices of the Bank for International Settlements will surely amend the newly minted Basel II international regulatory accord. Also being questioned, tangentially, are the mathematically elegant economic forecasting models that once again have been unable to anticipate a financial crisis or the onset of recession.
Credit market systems and their degree of leverage and liquidity are rooted in trust in the solvency of counterparties. That trust was badly shaken on August 9 2007 when BNP Paribas revealed large unanticipated losses on US subprime securities. Risk management systems – and the models at their core – were supposed to guard against outsized losses. How did we go so wrong?
The essential problem is that our models – both risk models and econometric models – as complex as they have become, are still too simple to capture the full array of governing variables that drive global economic reality. A model, of necessity, is an abstraction from the full detail of the real world. In line with the time-honoured observation that diversification lowers risk, computers crunched reams of historical data in quest of negative correlations between prices of tradeable assets; correlations that could help insulate investment portfolios from the broad swings in an economy. When such asset prices, rather than offsetting each other’s movements, fell in unison on and following August 9 last year, huge losses across virtually all risk-asset classes ensued.
The most credible explanation of why risk management based on state-of-the-art statistical models can perform so poorly is that the underlying data used to estimate a model’s structure are drawn generally from both periods of euphoria and periods of fear, that is, from regimes with importantly different dynamics.
The contraction phase of credit and business cycles, driven by fear, have historically been far shorter and far more abrupt than the expansion phase, which is driven by a slow but cumulative build-up of euphoria. Over the past half-century, the American economy was in contraction only one-seventh of the time. But it is the onset of that one-seventh for which risk management must be most prepared. Negative correlations among asset classes, so evident during an expansion, can collapse as all asset prices fall together, undermining the strategy of improving risk/reward trade-offs through diversification.
If we could adequately model each phase of the cycle separately and divine the signals that tell us when the shift in regimes is about to occur, risk management systems would be improved significantly. One difficult problem is that much of the dubious financial-market behaviour that chronically emerges during the expansion phase is the result not of ignorance of badly underpriced risk, but of the concern that unless firms participate in a current euphoria, they will irretrievably lose market share.
Risk management seeks to maximise risk-adjusted rates of return on equity; often, in the process, underused capital is considered “waste”. Gone are the days when banks prided themselves on triple-A ratings and sometimes hinted at hidden balance-sheet reserves (often true) that conveyed an aura of invulnerability. Today, or at least prior to August 9 2007, the assets and capital that define triple-A status, or seemed to, entailed too high a competitive cost.
I do not say that the current systems of risk management or econometric forecasting are not in large measure soundly rooted in the real world. The exploration of the benefits of diversification in risk-management models is unquestionably sound and the use of an elaborate macroeconometric model does enforce forecasting discipline. It requires, for example, that saving equal investment, that the marginal propensity to consume be positive, and that inventories be non-negative. These restraints, among others, eliminated most of the distressing inconsistencies of the unsophisticated forecasting world of a half century ago.
But these models do not fully capture what I believe has been, to date, only a peripheral addendum to business-cycle and financial modelling – the innate human responses that result in swings between euphoria and fear that repeat themselves generation after generation with little evidence of a learning curve. Asset-price bubbles build and burst today as they have since the early 18th century, when modern competitive markets evolved. To be sure, we tend to label such behavioural responses as non-rational. But forecasters’ concerns should be not whether human response is rational or irrational, only that it is observable and systematic.
This, to me, is the large missing “explanatory variable” in both risk-management and macroeconometric models. Current practice is to introduce notions of “animal spirits”, as John Maynard Keynes put it, through “add factors”. That is, we arbitrarily change the outcome of our model’s equations. Add-factoring, however, is an implicit recognition that models, as we currently employ them, are structurally deficient; it does not sufficiently address the problem of the missing variable.
We will never be able to anticipate all discontinuities in financial markets. Discontinuities are, of necessity, a surprise. Anticipated events are arbitraged away. But if, as I strongly suspect, periods of euphoria are very difficult to suppress as they build, they will not collapse until the speculative fever breaks on its own. Paradoxically, to the extent risk management succeeds in identifying such episodes, it can prolong and enlarge the period of euphoria. But risk management can never reach perfection. It will eventually fail and a disturbing reality will be laid bare, prompting an unexpected and sharp discontinuous response.
In the current crisis, as in past crises, we can learn much, and policy in the future will be informed by these lessons. But we cannot hope to anticipate the specifics of future crises with any degree of confidence. Thus it is important, indeed crucial, that any reforms in, and adjustments to, the structure of markets and regulation not inhibit our most reliable and effective safeguards against cumulative economic failure: market flexibility and open competition.
The writer is former chairman of the US Federal Reserve and author of ‘The Age of Turbulence: Adventures in a New World’

Da Literatura: O RECADO DE CAVACO

"It should not come as a surprise that, as with authoritarianism everywhere, the lack of adequate accountability in corporate management has spawned abuse. It was pretty clear during my quarter century on corporate boards that petty abuse was widespread, and on occasion that abuse rose above the petty.
Accordingly, I am not surprised that the outsize CEO compensation packages of recent years have raised public concerns of unseemliness..."

The Age of Turbulence (Corporate Governance)
Alan Greenspan

ABAIXO AS TAXAS DE JURO!

O artigo de Nouriel Roubini, Why monetary policy easing is warranted even in the current insolvency crisis, publicado ontem, é recomendado para uma leitura paralela com "The Age of Turbulence" de Alan Greenspan, sobretudo na parte que relata a súbita derrapagem da Tesouraria dos EUA logo após a decisão de George W. Bush de creditar aos contribuintes norte-americanos uma parte dos impostos por eles pagos no ano anterior. Tal decisão suportava-se na promessa feita por Bush ao eleitorado, enquanto candidato ao primeiro mandato na presidência dos EUA, e no superávite observado na última fase do mandato de Clinton. Esse superávite de tesouraria tinha atingido um volume tão excessivo, e nunca antes observado, que chegou a colocar ao Fed uma questão original: Como poderia o Fed intervir no mercado de capitais sem dispor de dívida pública para vender ou comprar? Questão que justificou a constituição de uma comissão para estudar o assunto que produziu um relatório denso de mais de três centenas de páginas.

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Algum tempo depois, o superávite tinha-se evaporado, precisamente quando as cartas de reembolso estavam a ser enviadas aos contribuintes, e o Fed voltava a fazer aquilo que normalmente faz: baixar e subir as taxas de juro.

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A nova economia, e sobretudo a nova economia norte-americana esvaziava-se dos excessos com que muitos se tinham deleitado e espantado (e enriquecido fabulosamente de um dia para o outro) e entrava em período recessivo fazendo recear um período de deflação idêntico ao observado no Japão durante 13 anos.

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A deflação não aconteceu. Aconteceram, contudo, o 11 de Setembro, a caça à al Qaeda, a invasão do Afeganistão e do Iraque, as ameaças de antrax, snipers na área de Washington, os escândalos financeiros da Enron e da WorldCom, a SARS (a gripe mortal originária da China).

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A situação actual, apesar do receio generalizado de uma crise económica no próximo ano, é, por agora, muito mais calma.

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Esperemos que recupere com mais umas reduções ou uns aumentos das taxas de juro comandados agora por Ben Bernanke. Como sempre, contudo, os palpites acabam sempre por baralhar as teorias e a neuroeconomia ainda está na infância. Para já o dólar tem estado a recuperar contra quase todas as moedas com a notícia do aumento da inflação nos EUA.

Amanhã, ver-se-á se continua a inflexão vigorosa iniciada a semana passada.

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Why monetary policy easing is warranted even in the current insolvency crisis

Nouriel Roubini Dec 15, 2007

Recently I have been repeatedly asked – by commentators on this blog and others - the following questions: If you rightly believe that the current global financial crisis is one of insolvency and not just of illiquidity and is also due to fundamental incentive problems of financial agents in a world of asymmetric information why do you now recommend that central banks aggressively cut interest rates? Since you argue that monetary easing will not prevent the unavoidable hard landing why to support a reduction in policy rates? Wouldn’t this monetary easing imply a bailout of reckless lenders, borrowers and investors, cause another asset bubbles and prevent the necessary – if painful – loss of asset values and restructuring of distressed claims? And wouldn’t this monetary easing risk causing high inflation at a time when such inflationary pressures are already rising? And since – as you correctly argued – the recently announced coordinated monetary policy injection by central banks has so far failed to affect liquidity spread in a significant way – why should easing policy rates make any difference?

more: http://www.rgemonitor.com/blog/roubini/232729/

A LANCHEIRA DE GREENSPAN

Há mais de cinquenta anos, em Portugal, os operários iam de lancheira para a fábrica; os camponeses arrumavam numa bolsa ou num cesto umas buchas para aguentar um dia de trabalho. Ainda hoje estou para saber como era possível um trabalhador do campo desenvolver tanto esforço físico tão frugalmente alimentado sem arrasar as leis da termodinâmica. A maior parte dos empregados em serviços administrativos e correlativos almoçava em tascas, restaurantes e cantinas, consoante o estatuto. Os que residiam nas proximidades dos locais de trabalho normalmente almoçavam em casa.

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Hoje são raros os que levam almoço de casa.

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Lembrei-me deste assunto ao ler Alan Greenspan (The Age of Turbulence):

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"In pop culture, I was right up there with the sock puppets. CNBC invested a gimmick called the "briefcase indicator" in which cameras would follow me on the mornings of FOMC meetings as I arrived at the Fed. If my briefcase was thin, theory went, then my mind was untroubled and economy was fell. But if it was staffed full, it meant I´d burning the midnight oil and a rate hyke loomed. (For the record, the briefcase indicator was not accurate. The fatness of my briefcase was solely a function of whether I had packed my lunch)".

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Estávamos em 2000 e os EUA no auge do boom da "nova economia". Mas a lancheira de Greenspan (Greenspan tinha então 74 anos de idade) estava longe de ser uma originalidade dele: uma grande parte dos norte-americanos leva consigo para o local do trabalho o seu almoço, de casa. E, geralmente, aqueles que, ocasionalmente, almoçam no restaurante, se sobra comida, levam-na consigo para o jantar em casa.

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Particularidades do país com mais elevado rendimento per capita médio do mundo.

FORECASTING ART

"Boy, I´m glad I don´t have Walter Heller´s job. I Knew that macroeconomic forescasts are far more art than science"