The Age of Turbulence (2007); Epilog (2008), by Alan Greenspan


Since book titles can’t be copywrited, Eugene O’Neill (i.e., his estate) can’t sue should we insist on applying one of his best drama titles to Greenspan’s Second Edition of his long and complex autobiography whose style and tempo ill serve his own title, The Age of Turbulence.

That would be Long Day’s Journey Into Night.

But I wouldn’t insist on appropriating such a gripping title for The Age Of Turbulence. Great titles like O’Neill’s should be left alone. Bad ones, especially terribly careful as well as safely general ones (e.g., “turbulence”), can be disregarded. Well, maybe they’re useful for gaining some sense of the psychology in question. Hint: We’ll look for duplicity, especially of the ironic kind. And we’ll not cast the first stone, for that would be dishonest.

Greenspan says he wrote much of The Age of Turbulence during warm baths. I can sense it for the First Edition which came out in 2007.

I can’t for the Epilogue he added in 2008.

Too much turbulence then for a bathtub.

I’m certain you could deal with the 2008 turbulence better at a desk. After all, a desk, if it’s an expensive wooden one, floats. I’m strongly guessing that’s where Greenspan rode out the stormy seas of 2008 as briefly as possible in that new Epilogue for the late-breaking, rushed-out Second Edition.

If it’s permissible to think of History as an ocean, maybe you can associate that Epilogue not with a desk but with the coffin that the famous adventure narrator clung to as a life-preserver after the surprise of the terrible sinking of the Pequod. The survival instinct being predominant in all of us, the coffin-bourne survivor, alone and precariously adrift on the heavily rolling tide, tries to take stock. The shock shorts the stock. (Not bad, eh?) That’s probably why all we’re getting from Greenspan as a bad-weather report is that Epilogue. The Bathtub Edition…well, the great waves came after that edition.

So: the Epilogue was doubtless hard to write, very hard, you have to believe. I think it’s been described variously: Say Something, For God’s Sake! Put It Behind You Quickly! Put The Best Face On It!

The Age of Turbulence is jointly authored by Greenspan and Old Man History. The Epilogue skims over the Forty Days and Forty Nights of Stormy Weather Old Man History continues to write as we gather here. Ain’t no sun up in the sky.

I don’t blame Greenspan that his epilogue is quick and short (or, from the reader’s viewpoint, The Quick And The Dead [to tread a little on Mickey.]). So: “Epilogue,” as in, Nice Try.

I mean, the Storm continues and, well, “Epilogue” can’t seem right.

OK. Point taken.

Well, it’s a book that you’d hope many citizens will read. Greenspan is brilliant, thoughtful, gentle, avuncular, and He Was There. Probably for most of us, certainly for me, it has truth and wisdom about economics and, more importantly, the crucial management of national and now global macroeconomics, that simply passeth understanding in its more arcane moments, moments I suspect he couldn’t avoid since no doubt for some matters in Economics a Moron’s Guide simply isn’t doable, try as the Expert (no, the Guru) might. He makes the case well against centrally planned economies and for market-driven economies. History has been on his side here, downright friendly in fact, and he makes the most of that friendship. I could say much about that, but he does so already, in hundreds of pages, and with infinitely greater authority than any I might have (not to mention almost everyone else, too). You can’t but profit from reading Greenspan’s book.

Is there a problem with the thinking in The Age of Turbulence, thinking among the most prominent we’ve had in the world of operational economics? I think there obviously is. And it’s dismaying.

What is it?

Well, after several hundred pages covering many years and with much ado about plenty, it all seems to come down to the management of market-driven economies. And may we preserve and extend them! Old Man History seems loud and clear on the necessity. Several clever Devils’re in the details but the History Deity’s sent clear commandments.

The problem lies with Adam and Eve. Yet again. We’ve known about them forever, it seems, but we keep forgetting what they’re really like. Alan Greenspan’s just too trusting about that pair. He dozed in that warm bathtub but had to wake up from a false dream about a putative reasonable behavior of Homo sapiens to find himself manning that desk in the cold waves, which is cruel since he’d only shortly ago retired.

As that would-be innocent Artful Dodger, The Wall Street Journal, editorialized: the trusting Greenspan put those fed fund rates way, way down after 9/11 and the dot-com bust. Kept them down for a few years. Wanted to get us out of the doldrums and into the trade winds again. (This was, of course, pre-bathtub times.) In the bathtub, while he was in the warm, lapping water, here’s what he thought was going to happen. Boy. It’s all over the enormity of the Bathtub Edition, embarrassingly: the Punch Line; the Theme. Now Greenspan uses some arcane economic jargon in expressing his theme, for example, “undervaluing risk” and “counterparty auditing” and the like, but it all seems to sum to this fairy tale of Ayn Rand’s: In the vital market-driven economies, the thing that’ll keep us out of trouble (I mean the kind of trouble we’ve since found ourselves in during this current, post-bathtub storm) is that the big Wall Street banks won’t help each other get too leveraged because that wouldn’t be prudent lending on the part of any of them. Selfishness will keep the money machine in check. So: government regulation isn’t that important; hell, it’s a problem both in an inevitable lack of competence among regulators and, well, to cut to the chase: it not only isn’t even plausible but is likely mischievous. Oh, sure, there will be some somewhat “prolonged periods of risk undervaluation,” but risk-averse “counterparties” will keep the ship steady as she goes. A better way to put it, since economics and the voyage story may not be so good for one another, is that the happy capitalist dream comes down to a thrilling false contingency of members of the financial sector getting themselves leveraged 35-1 or (gasp) 40-1 or (Help!) 50-1 with specialized debt “instruments,” but Lo!–Worry Not!–for shrewd, selfish “counterparties” will keep one another from doing so.

Oh, wow.

The trouble here is foolishness. Said less plainly: if fantasy gains: if there is a sweeping hysteria of risk-taking in a plague of short term greed so that the “debt instruments” happen to be packages stuffed in part or whole with lousy mortgage loans strenuously and massively solicited and which have been overrated by fee-hungry rating agencies–are, in short, “toxic” mortgage-based securities–on the assumption that there is no tomorrow purged of dumb, trusting investors, there cometh Der Tag.

Alas, greed has then for certain become not good.

Now, Greenspan makes a case for today’s global financial system and financially engineered “instruments” therein as part of the long-term-healthy movement of trillions of dollars here, there and everywhere.

It’s just that the “counterparties” didn’t counter. They joined in. They tried to jostle their way to the front. They must have believed in something like, “There’s no tomorrow.”

Greenspan calls it one of the familiar “euphoric periods” in economic history. That’s in the Bathtub Edition. In the Epilogue Edition he’s in doctrine creep toward somehow someway some kind of new requirement-imposition to ward off “risk undervaluation.” That means, lets try to not get to 35-1 or worse. Might we “require” that people don’t? In the Epilogue, he’s “appalled” and “shocked” that we did have people who got there. But he doesn’t say anything further about the newfangled “requirement.” Sure seems like the question, though, after the 563 pages of The Age of Turbulence.

And of course, “requirement” = (grudgingly) “regulation.” I’m guessing he just couldn’t bring himself to utter the word.

There’s a psychologist at MIT who, if I’ve got his crucial late-breaking, published and refereed research even halfway accurately described, says that when you go to 35-1 your brain patterns (I know, we still don’t really know enough about what all that might mean) are effectively indistinguishable from those of a cocaine addict on a high induced by that drug. You see the clear similarity. I guess we might say that there isn’t any “counterparty” stuff making any impression in either brain.

So: who will bell the cat? It’s that old story.

Can the cat be belled? Can there be an effective regulatory system? Reading The Age of Turbulence it sounds like it’d be tough. There are problems like these: it’s hard to keep up with the “undervaluing of risk” in today’s electronic global economy; a lot of smart important people won’t like the belling; a lot of dumb important people won’t like it; Congress (yes, I know) won’t like it (but they can’t all be like Phil Gramm); gov’t regulators, if history is any guide, aren’t up to it; and so on for much more distressing stuff.

Greenspan likes Reagan’s comment, “Government is for protecting us from each other, not from ourselves.” Actually, what does that mean? It sounds great, but upon reflection…. We used to call this kind of stuff a “false distinction” and a “glittering generality.” Being greatly presumptuous, I’m sure, it seems to me after the long, long passage through The Age of Turbulence, that in the sense of the pain we’re going through now, maybe we should hope that as far as goes economics, management thereof (albeit perhaps there isn’t much room for management in good, precious economics [i.e., market-driven and may they long prevail!]), we should hope that there might be some safe way for there to be a practicable requirement that mitigates 35-1 and shines a light through Reagan’s dubious distinction.

Alan Greenspan is an American notable, and The Age Of Turbulence an ironic drama of great value, if more diagnostic than prescriptive.

However,  there seems nothing in Greenspan’s vast book that comes close to Warren Buffet’s description of the “risk undervaluation” of the past few years as promoting “financial weapons of mass destruction.”

Certainly that tells us well that it’s time for some innovative, safe, effective “requirements.” We’ll hope it’s possible, because the scaling up of cyclical troubles in the Financial Sector, it seems clear, is becoming overwhelming.