The bubble economy — Is this time different?

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Event Summary

On Wednesday, two decades after Alan Greenspan’s famous “irrational exuberance” speech at AEI in 1996, Dr. Greenspan spoke at AEI again and asked, “Is this time different?” He answered, “No, it never is, if you’re dealing fundamentally with human nature.” He argued that we are always in the grip of a new and detrimental overvaluation — it is just a matter of degree.

Following Dr. Greenspan’s remarks, an expert panel discussed whether the world economy is now experiencing an asset market price bubble and what might be done to prevent such bubbles. William White, from the Organisation for Economic Co-operation and Development, spoke on the relationship between public policy and financial crises. He hopes that the current economic state is different than other unbalanced times, but we should prepare for the worst. AEI’s Vincent Reinhart argued that detecting bubbles may be hard, but an accelerant to their formation is still in place. Adam Posen, from the Peterson Institute for International Economics, argued that there are ways of coping with the current economic situation. AEI’s Desmond Lachman concluded by discussing the uncharted territory that central banks have entered.

—Isabelle Staff

Event Materials

Event Transcript
From the archives: Four decades of Alan Greenspan at AEI

The Global Economy Is Partying Like It’s 2008

The Market Collapse Blame Game

Event Description

Two decades after Alan Greenspan’s famous “irrational exuberance” speech at AEI in 1996, global asset market prices again appear to be frothy. Years of highly unorthodox monetary policy have contributed to record-high global stock market prices, unprecedentedly low and even negative government bond yields, and renewed housing market bubbles.

This seminar will discuss whether the world economy is now experiencing an asset market price bubble and what might be done to prevent such bubbles from forming. It will also consider how policymakers might better respond to the bursting of bubbles to avoid a repeat of the boom-bust cycles of recent years.

Join the conversation on social media by following @AEI and @AEIecon on Twitter and Facebook.

If you are unable to attend, we welcome you to watch the event live on this page. Full video will be posted within 24 hours.


Agenda

9:45 AM
Registration

10:00 AM
Introduction:
Alex J. Pollock, R Street Institute

10:05 AM
Introduction of Alan Greenspan:
Peter J. Wallison, AEI

10:10 AM
Keynote address:
Alan Greenspan, Greenspan Associates

10:45 AM
Panel discussion

Participants:
Desmond Lachman, AEI
Adam Posen, Peterson Institute for International Economics
Vincent R. Reinhart, Standish Mellon Asset Management; AEI
William White, Organisation for Economic Co-operation and Development

Moderator:
Alex J. Pollock, R Street

12:10 PM
Q&A

12:30 PM
Adjournment


Event Contact Information

For more information, please contact Ryan Nabil at [email protected], 202.419.5204.


Media Contact Information

For media inquiries or to register a camera crew, please contact [email protected], 202.862.5829


Alan Greenspan served as chairman of the Federal Reserve Board from 1987 to 2006, led President Gerald Ford’s Council of Economic Advisers as chair from 1974 to 1977, and was the chairman of the National Commission on Social Security Reform from 1981 to 1983. He was appointed a member of the President’s Foreign Intelligence Advisory Board, the Commission on Financial Structure and Regulation, and the Commission on an All-Volunteer Armed Force. Before his appointment to the Federal Reserve Board, Dr. Greenspan served as a director of numerous corporations, including J.P. Morgan & Co. Inc., Mobil Corporation, Aluminum Company of America, General Foods Corp., and Capital Cities/ABC Inc. He was a term member of the board of trustees of the Rand Corporation, a member of the board of overseers of the Hoover Institution at Stanford University, vice chairman and trustee of the Economic Club of New York, and director at the Council on Foreign Relations. He received a B.S. (summa cum laude), M.A., and Ph.D. from New York University and honorary degrees from Harvard, Yale, Pennsylvania, Notre Dame, Leuven, and Edinburgh universities. He has also received numerous awards, including the Commandeur de la Legion d’Honneur from France, Knight Commander of the British Empire, and the Presidential Medal of Freedom, the United States’ highest civilian award. Dr. Greenspan heads Greenspan Associates, a consulting firm in Washington, DC, and is the author of the New York Times bestsellers “The Map and the Territory: Risk, Human Nature, and the Future of Forecasting” (Penguin Press, 2013) and “The Age of Turbulence: Adventures in a New World” (Penguin Books, 2008).

Desmond Lachman joined AEI after serving as a managing director and chief emerging market economic strategist at Salomon Smith Barney. He previously served as deputy director in the International Monetary Fund’s (IMF) Policy Development and Review Department and was active in staff formulation of IMF policies. He has written extensively on the global economic crisis, US housing market bust, US dollar, and strains in the euro area. At AEI, Dr. Lachman is focused on the global macroeconomy, global currency issues, and multilateral lending agencies.

Alex J. Pollock is a distinguished senior fellow at the R Street Institute in Washington, DC. Before joining R Street, he was a resident fellow at AEI from 2004 to 2015 and president and CEO of the Federal Home Loan Bank of Chicago from 1991 to 2004. Mr. Pollock focuses on financial policy issues, including financial cycles, government-sponsored enterprises, housing finance, banking, central banking, uncertainty and risk, retirement finance, corporate governance, and financial crises with their ensuing political responses. He is the author of “Boom and Bust: Financial Cycles and Human Prosperity” (AEI Press, 2010) and numerous articles and congressional testimonies. Mr. Pollock is a director of CME Group Inc., the Great Lakes Higher Education Corporation, and the Great Books Foundation, where he was chairman of the board from 2006 to 2014, and he is a former president of the International Union for Housing Finance. He is a graduate of Williams College, the University of Chicago, and Princeton University.

Adam Posen is the president of the Peterson Institute for International Economics and an American economist. Over his career, he has written about the financial and economic challenges faced by the European Union following the adoption of the euro, the lasting impact of Japan’s economic crisis of the 1990s, and monetary and fiscal policies in the G7. While at the Federal Reserve Bank of New York from 1994 to 1997, he coauthored “Inflation Targeting: Lessons from the International Experience” (Princeton University Press, 2001) with Ben Bernanke and others. In addition to his leadership at the Peterson Institute, Dr. Posen advises the US Congressional Budget Office. He is a member of the Council on Foreign Relations and the Trilateral Commission.

Vincent R. Reinhart is the chief economist and investment strategist for Standish Mellon Asset Management. He is responsible for developing views on the global economy and making relative value recommendations among global bond markets, currencies, and sectors. Previously, he was chief US economist and managing director at Morgan Stanley. For the prior four years, he was a resident scholar at AEI. Mr. Reinhart worked at the Federal Reserve for 24 years, most recently as director of the Division of Monetary Affairs and secretary and economist of the Federal Open Market Committee (FOMC). His responsibilities at the Federal Reserve included directing research and analysis of monetary policy strategies and the conduct of policy through open market operations, discount window lending, and reserve requirements. He was the principal liaison with the domestic desk at the Federal Reserve Bank of New York and was responsible for preparing a document outlining policy alternatives for each FOMC meeting. His earlier experience in the Federal Reserve System included a two-year stint as deputy director in the Division of International Finance and associate economist of the FOMC and five years at the Federal Reserve Bank of New York in a variety of capacities in both the Domestic and International Research Departments. His academic publications primarily concern the conduct of policy and issues related to the monetary transmission mechanism and an analysis of alternative auction techniques and Treasury debt management. After undergraduate training at Fordham University, he received graduate degrees in economics at Columbia University.

Peter J. Wallison is a codirector of AEI’s program on financial policy studies and researches banking, insurance, and securities regulation. As general counsel of the US Treasury Department, he had a significant role in the development of the Reagan administration’s proposals for the deregulation of the financial services industry. He also served as White House counsel to President Ronald Reagan and is the author of “Ronald Reagan: The Power of Conviction and the Success of His Presidency” (Westview Press, 2002). His other books include “Competitive Equity: A Better Way to Organize Mutual Funds” (AEI Press, 2007); “Privatizing Fannie Mae, Freddie Mac, and the Federal Home Loan Banks: Why and How” (AEI Press, 2004); “The GAAP Gap: Corporate Disclosure in the Internet Age” (AEI Press, 2000); and “Optional Federal Chartering and Regulation of Insurance Companies (AEI Press, 2000).”

William White is the chairman of the Economic and Development Review Committee at the Organisation for Economic Co-operation and Development (OECD). This committee carries on regular evaluations of the policies of both member countries and aspiring members of the OECD. In his capacity as chairman, to which he was appointed in October 2009, he also contributes to meetings of WP1 and the Economic Policy Committee of the OECD. He was also a member of the Issuing Commission, advising the German chancellor on G20 issues. Mr. White joined the Bank for International Settlements in June 1994 as manager in the Monetary and Economic Department and was appointed economic adviser and head of the Monetary and Economic Department in May 1995. He spent 22 years with the Bank of Canada and was appointed adviser to the governor in 1984 and deputy governor of the Bank of Canada in 1988. Since the late 1980s, he has been an active participant in many international committees, including the EPC and WP3 at the OECD, the G10 Deputies, and the Bellagio Group, which brings together senior government officials, central bankers, and academics. Mr. White began his professional career at the Bank of England, where he was an economist from 1969 to 1972. He was educated at the University of Windsor and received his Ph.D. from the University of Manchester in 1969.

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