Is this stunning? Not really. I mean, it’s not like Greenspan has claimed the free market ideology is flawless.
This admission by one of the biggest players in the Milton Friedman camp is certainly welcome, especially after years of them shunning any sort of regulations because they were deemed unhealthy for the market.
“Yes, I found a flaw,” Greenspan said in response to grilling from the House Committee on Oversight and Government Reform. “That is precisely the reason I was shocked because I’d been going for 40 years or more with very considerable evidence that it was working exceptionally well.”
Greenspan said he was “partially” wrong in opposing regulation of derivatives and acknowledged that financial institutions didn’t protect shareholders and investments as well as he expected.
“We cannot expect perfection in any area where forecasting is required,” he said. “We have to do our best but not expect infallibility or omniscience.”
So, is the “freer” market era over? Are we moving into a different territory now where government intervention in the markets is the rule, not the exception?
What say you?