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Steve Forbes versus Alan Greenspan, Round One

So yesterday we had Alan Greenspan in the morning at the BAI Retail Delivery Show.   

Caesar’s Palace if they were put in the ring together so I guess they don’t like each other very much.

Forbes, who is chairing Rudy Giuliani’s campaign for the Presidential office this year, was outspoken and funny. 

His role was to put a positive spin on the current black clouds in the market and so he began by saying that America was doing great.  America’s growth rate over the last four years was equivalent to the total GDP of China this year. Worker productivity is twice the rate of a decade ago.   Corporate inventories are tightly controlled and corporate balance sheets are well structured, even though they have $2 trillion of cash floating on their balance sheets, which is not ideal.

When you take what people own in terms of life policies, bank CD’s, 401k’s, etc, and take away their liabilities of credit cards and mortgages, etc, American households are a net positive nation to the tune of $29 trillion.  That is more in savings than the rest of world saves in total.  This does not even take account of their main asset – a house – which would add another $25 trillion.

America is still also creating many new jobs and income, so what’s not to like?

The subprime?

Subprime is a $3-400 billion, so yes it’s a big number … but stock markets lose that in a day, so what’s the problem?

Sure, it’s headline news but subprime is more like someone finding ecoli in a lettuce bag.  The media gets a hold of it and suddenly the whole nation stops buying lettuce, even though it was just one bag out of millions that had the issue.

As you can see, Steve was giving the US domestic audience a positive view which was pretty much the opposite of Greenspan’s gloomy inflationary predictions. 

So Forbes is not a fan of  Greenspan.  This was clear when he made the statement that Alan had spent twenty years speaking in strange foreign languages that no-one could understand, then he leaves office and suddenly learns English and speaks clearly.  A reference to the fact that Greenspan never answered any questions directly in his twenty years in the Federal Reserve, but now he’s out of office he writes a book that everyone reads and can understand clearly.

Equally, Forbes does not agree with Greenspan’s views on the root cause of the subprime crisis.

The Federal Reserve created the subprime crisis by creating excess liquidity back in 2003.

Now who was in office back then I wonder?

The other big news of the day is that with the dollar at an all time low and house prices crashing, the USA is a very good market for overseas property investors … my Miami beach house is under offer.

As we walked into the conference theatre, there were big signs everywhere saying: “no media”.  Apparently Dr. Greenspan’s people had been very strict about this and so anyone with a media badge, which were bright green this year, were barred. 

L’il ol me is not media you see.  I just happen to be a blogger.  That’s social media, not mainstream media, so that’s ok. So I speed typed and caught the whole speech on my Sony Vaio. 

This is an example of old school PR, where the company think they can control the message, as in you can ban media access to private meetings.  Unfortunately, in the new world, everyone is media.  Anyone can publish what transpires in an email, on a blog, in a podcast, through a chatroom.  So the fact is you can’t control or hide anything, as I blogged about the other week.

The other reason this amused me is that Alan was engaged in a meeting style discussion with Gerard Baker.  Mr. Baker is the U.S. editor of the Times newspaper that is head officed in London. 

Now the Times newspaper … isn’t that media?

Gerard also made the joke of the day when he referred to the subprime crisis as being caused by the mass sales of "NINJA loans which are made to people on the basis that they have No Income, No Job and no Assets”.

Anyway, the next keynote came from Steve Forbes in the afternoon. 

Forbes and Greenspan are two guys who are polar opposites.  Forbes … the charismatic publisher with a fortune in the bank who ran for President.  Greenspan … the banker.

At one point  a reference was made to the fact that these two guys would sell out

About Chris M Skinner

Chris M Skinner
Chris Skinner is best known as an independent commentator on the financial markets through his blog, the Finanser.com, as author of the bestselling book Digital Bank, and Chair of the European networking forum the Financial Services Club. He has been voted one of the most influential people in banking by The Financial Brand (as well as one of the best blogs), a FinTech Titan (Next Bank), one of the Fintech Leaders you need to follow (City AM, Deluxe and Jax Finance), as well as one of the Top 40 most influential people in financial technology by the Wall Street Journal’s Financial News. To learn more click here...

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