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Wednesday, July 23, 2014

Paul B. Farrell
July 23, 2014, 7:44 a.m. EDT

Great Crash of 2016, third $10 trillion loss this century

Commentary: Greenspan’s ‘black box’ syndrome now handicaps Yellen


By Paul B. Farrell, MarketWatch 

Sometime after the Great Crash of 2016, Fed Chairwoman Janet Yellen will be testifying before Congress, just like Alan Greenspan was forced to do in 2008. She will be explaining why America has already had three megacrashes in the 21st Century, each draining roughly $10 trillion, each a direct result of Federal Reserve policy failures. She will be forced to explain why the Great Crash of 2016 was a clone of the bank credit crash of 2008 and the 2000 excesses. 

Getty Images
Former Federal Reserve Chairman Alan Greenspan.
But we already know exactly what Yellen will be forced to admit: That she is a clone of Alan Greenspan, who was a perfect clone of capitalism’s patron saints, Milton Friedman and Ayn Rand, going back decades. To fully understand this self-destructive lineage, simply focus your laser on the one admission Greenspan made to Congress in 2008, eight words that explain why Greenspan’s bizarre capitalism failed and why it will happen again and again under Yellen ... 

“I really didn’t get it until very late.” 

No, you don’t have to be a neuroscientist, psychologist or behavioral-finance genius to understand what Greenspan was saying, in this confession to Congress, to American investors, the whole world:
Greenspan says capitalism was working just fine ... in his head ... for decades ... then suddenly, capitalism stopped working ... capitalism exploded in his face ... capitalism is a bubble machine ... very predictable bear-bull cycles ... and a bad habit of exploding ... just when you hope to get just a little richer ... but instead, capitalism’s bubble explodes ... triggering trillions in losses ... did it in 2000, again in 2008, certain to repeat around 2016 ... 

What was it Greenspan, Bernanke, now Yellen never “get?” 

Very simple, the facts. Our Fed leaders not only favor big banks, billionaires, CEOs and insiders, but they simply ignore the facts that capital markets move in predictable cycles. Markets work until they don’t work. Rise to a peak. Explode. Crash. Bears naturally follow bulls. This time is never different. There is no perpetual money machine for capitalist. Facts always trump ideology.

Although the average human knows capitalism dogma is seriously flawed, our Fed leaders will just keep spreading it, till it’s too late to stop capitalism’s kamikaze trajectory. Worse, there are no incentives to change the system Adam Smith invented and Greenspan, Rand and Friedman have distorted. 

Quite the contrary, today’s dysfunctional inequality-breeding capitalism keeps getting stronger: Why? Dodd-Frank reforms are dying as the collective power of America’s too-big-too-fail banks, hedge funds, CEOs and private-equity firms keeps growing, protected by anti-government politicians, do-nothing conservatives, weak Democrats, but most of all, a new capitalism where fewer than 100 billionaires own more than half the assets in the entire world. 

Eight words that define capitalism: “I really didn’t get it until very late” 

Yes, those 8 words say it all: “I really didn’t get it until very late.” That’s capitalism, a game of musical chairs. Admit nothing, till after a collapse. Thanks to the capitalist theories of Friedman and Rand, Greenspan was destined to fail America for 18 long years, is still claiming he didn’t “get it” till too late. Then Bernanke. Now it’s Yellen’s turn. America’s monetary leaders just don’t get it ... and they never will ... until it’s too late ... except next time capitalism implodes, taking American markets and the global economy into a big black hole, forever.

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