Whenever the economy comes crashing down, journalists try to figure out what went wrong, and their first target is frequently each other. Two weeks ago, The New York Times ran a devastating piece about CNBC’s popular pundit Jim Cramer, who’d been a relentless cheerleader for Wall Street in the run-up to the financial collapse. Gawker filleted Fortune for saying in December that AIG was one of the 10 best stocks to buy now. But one person who has come out of the meltdown smelling like a rose is William Greider, the cranky (but only in print!) 72-year-old columnist for The Nation, who has been predicting the apocalypse for practically half a decade. It’s a subject he has known a lot about since 1989, when he published “Secrets of the Temple,” considered by many to be the definitive book about the Federal Reserve (and certainly one of the most critical). Here, Greider talks about the Fed, presidents and economic malaise.
WWD: In August 2007, you wrote that “the country’s economic well-being is held hostage by the ‘modern’ financial system, with its fallible computer models and extreme oscillations between excess and panic. Our dependence started with fi nancial deregulation 25 years ago, but the dangers have grown steadily larger, still unaddressed by the political system.” What so concerned you that caused you to sound the alarm?
William Greider: Well, the housing thing was coming unwound then. In the spring and into the summer, you could see that the bubble had popped. And if you understood the fl aws, the kind of gross dereliction of the Federal Reserve and other regulators, going back some time, you understood that they were creating false prosperities, refl ected not in the real economy of producers with the workers, but in the fi nancial system. And that became this great talisman for prosperity.
WWD: Does it feel good in a way to have been right about something this awful?
W.G.: I’m a little ambivalent about it. On one hand, it makes you sick all over again. On the other, it is good to be confi rmed when so many people thumbed their noses at me for years. Because I felt for a long time like a bag lady standing on a street corner waving my placard. And the way this country runs, most times, especially the last 20 years, the governing elites, including the highfl ying press, gather around a set of ideas and convince themselves that they’re in charge of life and all good things that happen and they very relentlessly exclude dissenting opinions. That’s not just about me, it’s a lot of things. There are always some bag ladies on the street saying, “This is cockeyed” — Iraq being the most dramatic example, but there are a lot of others. And business goes on as if those words were never even said.
This story first appeared in the October 31, 2008 issue of WWD. Subscribe Today.
WWD: Last summer, you wrote that deregulation supported by Democrats under President Clinton helped lead to the current fi scal situation. If the mess lies with them as much as the Republicans, how on earth do we get out of it?
W.G.: In 1929, after a couple false starts, Congress hired an assistant New York district attorney named Ferdinand Pecora who really knew how to catch crooks, and he pored through those big banks, did the investigations right and had hearings that were sensational. But we may not get a modern-day equivalent of the Pecora hearings because both parties are deeply implicated in creating the preconditions for the meltdown. And if we don’t, our next best hope is a free, vigilant press.
WWD: Have you seen a big difference between Barack Obama and John McCain with regard to their proposed economic policies?
W.G.: Yes. McCain is hopeless. And I say that as someone who liked him a lot 10 years ago. But this year he’s completely lost it. He never really understood economics all that well and, now, he’s given himself over to the right wing agenda. Not just the religious Christians, but the bankers and everybody else. Obama is more cautious and deliberate than I would like, or some others would like, but I have a lot of hope in him to be able to evolve to a much stronger view of things.
WWD: You’ve long been a big critic of Alan Greenspan, whom you called the “one-eyed chairman” in 2002. Obviously, everyone is mad at him now, but why were you so critical when times were good?
W.G.: Greenspan tipped the balance hard in favor of capital and against labor, and he did that by disinfl ating the economy, suppressing labor wages and pumping up rewards for fi nance and capital. And he went too far. He drove the infl ation rate to a point approaching zero by keeping interest rates higher than they needed to be. In the mid-Nineties, he had to turn — that is, take his foot off the brake — because the country was at risk of disastrous defl ation. The problem was that he failed to do something to block infl ation from occurring in the fi nancial markets and Clinton basically just kept his mouth shut and took credit for the boom.
WWD: Does that mean you subscribe to the notion that presidents have little to do with the economy?
W.G.: If presidents take a compliant conservative stance, that’s true. But as we’ve seen in recent weeks, presidents can have profound impacts if they intend to. Bush’s fi scal policy helped unhinge the economy.
WWD: So you give Clinton little of the credit and Bush much of the blame?
W.G.: No, I blame both of them. Clinton turned over economic policy to the very conservative Federal Reserve. And Bush unhinged the economy by shifting all the rewards to the very high-end earners. But the balanced budget is not what led to the boom during Clinton’s presidency. And the recession of 2000 and 2001 was not started by Bush.
WWD: Where do you think the bottom will be?
W.G.: I don’t know. When the Dow was at 14,000, people would say to me, “How far does it have to come down?” And I’d say, “I don’t know. Maybe 8,000, 8,500.” Well, we’ve already hit that. A friend said to me last week, “I think it’s sort of at the bottom now, don’t you?” And I said, “I don’t know.” I know some things that haven’t happened yet that are negatives. And these emerging countries are now going belly-up, currencies are collapsing, we’ve got a lot of U.S. multinationals invested in those countries. So that’s going to be another wave of bad news. This is going to be a very hard time for Americans.
WWD: Your next book, “Come Home America,” hits early next year. What is it about?
W.G.: It’s my argument that the United States is at a profound turning point and, among other things, we are going to have to face up to economic and social contradictions we’ve been avoiding for decades. It’s the end of the triumphal post-World War II rise when we led the world and pretty much had our way. So I discuss globalization, militarism, the decay of political democracy, the ecological crisis, corporate power, you name it. And my timing is good.