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Book Review: Greenspan's Fraud, by Ravi Batra

Here is a book by an outstanding professor of economics, who predicted the date of the crash of the end-of-’90s economic bubble. Ravi Batra deflates Greenspan’s reputation as an economic wizard by presenting in great detail how Greenspan undermined the global economy. Batra calls Greenspan a fraud because Greenspan flip-flopped often in order to stay in the good graces of powerful people. Although supposedly a conservative, the main principle he followed was to always please the rich and powerful.

Greenspan, as head of the Federal Reserve, was supposed to maintain an economy that supports us all. But Batra says this about Greenspan's approach:

"Greenspan's economics may be abbreviated to Greenomics, which essentially turns out to be Greedomics, signifying a view that nothing should be done to interfere with business greed and the pursuit of profits."

Greenspan believes in rugged individualism and laissez faire. He and Ayn Rand were of the same mind about the virtue of selfishness. I had read some time ago that Ayn Rand said that Big Business is America's "persecuted minority." From Batra I learned that she got that idea from Greenspan.

Greenspan is against regulation of business. He is even against anti-trust laws. He feels the government should not be helping anyone in programs such as Social Security. Most important to him, taxes should be a low as possible.

Greenspan had a big hand in the Social Security brouhaha. Back in 1981 Reagan appointed Greenspan head of a Social Security Commission that was supposed to fix the system. How did he fix it? By recommending the most regressive tax we have ever had in U.S.: the payroll tax, which applies only to workers at the bottom and the middle class. His recommendations became law in 1983. He tried later to reduce worker benefit increases without success. In 2001 he was in favor of Bush's tax cuts and recently for Social Security privatization, even though they both would increase the deficit.

He says he is for low taxes. But he recommends tax cuts to take care of the rich and a payroll tax to take care of the poor. After being for tax cuts for the rich he asked Congress to follow their pay-go approach when legislating for the poor. Then he had the gall to complain about the huge deficit when he had previously recommended the huge tax cuts.

What a flip-flopper! His flip-flops on Social Security and taxes are insignificant compared to what he did with regards to regulation. Greenspan is for DE-REGULATION of business. Everybody knows this. Rich people swoon at his feet because of this. However, Batra tells the story of how when BIG PLAYERS are involved, REGULATION is needed.

In 1997 there was a crash. All sorts of people and businesses were in trouble. Greenspan believes that the market is holy: it will make corrections and the government should not interfere. However, there was an outfit called Long Term Capital Management (LTCM), a highly risky hedge fund for super-wealthy investors. It had "only" $3.5 billion, but borrowed $100 billion to invest. The borrowed money and the $3.5 billion equity disappeared.

What do you think Greenspan did? He bailed out LTCM. Yes, we must have de-regulation. However, we cannot allow such a big, rich, influential company to die.

Batra describes many Greenspan flip-flops. Toward the end of the book, Batra recommends a few reforms, among which are:

  • Cut payroll tax
  • Raise corporated income tax and eliminate loopholes
  • Top tax bracket - 40%
  • No preferential treatment for dividends and capital gains
  • Raise minimum wage to $8 per hour
  • Enforce anti-trust laws and break up conglomerates
  • Free trade
  • More manufacturing
  • Economic democracy
I learned a lot from this book, especially how raising the minimum wage and adopting progressive taxation will increase economic growth. I plan to write about these ideas in future posts.

Everything is covered in a rational way. However, it is not easy reading since you must apply yourself to get the most out of the book. But it is worth your intense attention. You may discover that the economic proposals of Democrats benefit the whole country, not only the rich, as do most Republican ideas.

Posted by Paul Siegel at December 5, 2005 8:39 PM
Comment #99093

That was a really stupid post. EOM.

Posted by: Idiot at December 5, 2005 9:07 PM
Comment #99095

So is this Batra guy really rich? If he can make such predictions, he must be.

Posted by: Jack at December 5, 2005 9:39 PM
Comment #99097

There is a conflict between emphasizing inflation or championing low unemployment as the primary economic goal. Emphasizing inflation means the Fed can raise interest rates to very high levels, crushing business and increasing unemployment. Greenspan has always pushed for fighting inflation (Bernanke is of the same mind)and has little empathy for the unemployed. If low unemployment was the primary economic goal, working to up stagnant wages and set a decent minimum wage would follow. The conflict between inflation and unemployment is a big secret - economists know about it but did you?

Posted by: dn4v at December 5, 2005 9:43 PM
Comment #99135

DN4V and Paul Siegel,
The interrelationship between inflation and unemployment is a fundamental concept in economics. The problem is that most people, including most journalists, are economically illiterate.

Paul Siegel needs to come to grips with a fundamental point. Alan Greenspan does NOT set US economic policy. US fiscal policy (ie, the budget), labor and business regulation are absolutely out of his control. He can voice an opinion during Congressional testimony and that’s about it. And even when he does that, what he (and Bernanke)says is over the heads of the simpletons who inhabit the halls of Capitol Hill.

Greenspan is the Chairman of the Federal Reserve—the United States’ central banker. His responsibility is monetary policy and, like anologous positions in Europe, Japan, etc. his responsibility is to “manage” monetary policy—the value of the dollar and fighting inflation through interest rate adjustments. High inflation hurts people of all income levels, and the poor are more susceptible to marginal price increaseas than anyone. If a gallon of milk increases to $5 in one month, a single mother making $20k is affected more severeley than a millionaire.

Fiscal policy—taxes and spending—is primarily the domain of Congress. The Fed Chair has no vote. The Fed Chair does NOT set US macroeconic policy. We’d be better off if learned economists did rather than political hacks of both parties.

Posted by: boojum at December 5, 2005 10:47 PM
Comment #99174


You really are hurting yourself here:

Here is a book by an outstanding professor of economics, who predicted the date of the crash of the end-of-’90s economic bubble. Ravi Batra

He also predicted the “The Great Depression of 1990” and wrote a book by that title.

Please don’t use kooks for economic references. If any person predicts an economic downturn eventually they will be right. To use Dr. Batra’s criticism of Dr Greenspan is not worthy of discussion.

there is legitimate reason for criticism of Dr Greenspan. Just use credible sourses.


Posted by: Craig Holmes at December 6, 2005 1:15 AM
Comment #99255

“Greenspan is against regulation of business. He is even against anti-trust laws. He feels the government should not be helping anyone in programs such as Social Security. Most important to him, taxes should be a low as possible”

This man is a god!

Posted by: kctim at December 6, 2005 9:24 AM
Comment #99269
Greenspan is against regulation of business

I would say, he is in favor of regulation by business. Our market, our economy is regulated. The only question is… Who gets to come up with the rules?

If a private company is making internal company policy decisions, fine. However, if those decisions are going to effect me negatively (externalities, pollution), I feel I should be able to have a say on that.

Posted by: Patrick Howse at December 6, 2005 10:40 AM
Comment #99485

Although I would have to do some serious homework, Mr. Grenspan told Congress in 2001 that any tax-cut should be set by establishing benchmarks to ensure fiscal responsiblity. Even in the last year Mr. Greenspan has encouraged Congress into allowing some the individual purchasing of US Federal Reserve Special Teasury Notes to better sure our finances.

Why I do not call Mr. Greenspan a wizard, I do respect his knowledge on how to allow the Market to run hot. Although I have not read Mr. Ravi Batra book it seems to me that he would like to see more federal control over who and what makes money. Inflation and unemployment is a smoking mirror argument and can easily be disproven as the 80’s & 90’s in America have proven.

Wages rose steadily during this time and inflation was kept in check by a sound Federal Reserve. Deflation only occured when the supply recession of 2001 was policies were put in place to limit the spendung powers of the average consumer. If Congress and the President would of listened to Mr. Greenspan’s call to change the payroll taxes in 2001 than today’s market would be looking totally different.

Posted by: Henry Schlatman at December 6, 2005 9:43 PM
Comment #100651

Who cares about a Dirty Jew ?

Posted by: Albert Garibay at December 9, 2005 3:32 PM
Comment #233873

What to do if you have some money today is worry about it. He said that gold will increase to at least $1,500 relatively soon. Home prices will keep declining and there will be less buyers of products which will cause a major economic decline. Interst rates will have to increase but this will not solve the failure of foreign investors withdrawing from our markets. The energy crisis and economic crisis are major problems for the Democrats taking office in the next election. I guess the future is very bleek. Looking forward to the Golden Age
Good Luck Everybody

Posted by: Ed Hombordy at September 21, 2007 9:32 PM
Comment #250068

central to Ravi’s argument is the wage gap. Which goes something like (although i may not get it right to the detail) = prolonged periods of productivity/wage growth > 100 and increasing will require increased debt to plug the whole between supply and demand (since productivity is the main driver of supply and wages are the main driver of demand in an economy). This leads to exponential growth in profits (bubbles). But the debt cannot be sustained over the long term (i.e. peoples/govts borrowing capacity maxes out against their ability to pay [wages arent rising that fast]) and when it falls away oversupply in the economy is exposed, you get low inflation and unemployment…

Although i found ravis (isnt he awful style a little annoying - constantly trying to share in moral outrage with me etc) i dont believe this is the book of a crank.

HIs views appear to me to be well considered, and his proof points are compelling, i’ve studies economics (but am not an economist). The reason i found this forum is because i’ve been looking for critiques with substance… I’ll keep looking.


Posted by: simon at April 8, 2008 5:44 PM
Comment #263513

I wonder if those with negative comments in this page are now with their foot in their mouth, after the news in the last few weeks, now who are the idiots (republican traitors)!!!!!….

Posted by: ABC at September 19, 2008 1:43 PM
Comment #281395

RAVI WAS RIGHT. Greenspan was a right wing idealogue not an economist.

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Comment #375139

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