Alan Greenspan recently wrote a book called “The Map & The Territory.”  I read it to see if the man who single-handedly caused the 2007 “Great” Recession had any idea what he’d done.

These are my findings:

The book opens with a long diatribe by Greenspan about how its all the fault of consumers.  He tips his hat to Keynes and labels the first chapter “Animal Spirits.”



Greenspan, like most Keynesians, has no idea what actually causes a recession.  As a former Federal Reserve Chairman that’s a convienent worldview anyway, since it liberates one from having to consider how suppressing the interest rate causes bubbles.  So, the majority of the book instead ponders how the 2007 recession could have gone from a normal recession to a historically bad recession.  The actual cause of the recession is chalked up to the psychological deficiencies of those dumb consumers:


  • “Herd behavior is a key driver and an essential characteristic of speculative booms & busts.” p. 25
  • “I call it Jessel’s Paradox… each “skeptical” buyer gradually becomes a committed bull.  The cumulative process of conversion of bears to bulls propels prices even higher, driven in part by herd behavior.” p. 70
  • “Aside from the excesses of Fannie, Freddie and much of the financial sector why did the 2007 bubble reach century-rare euphoria?” p. 72
  • “I saw too much of what we now describe as the influence of animal spirits.” p. 91
  • “Aberrations from rationality and efficiency – often reflecting the effects of animal spirits… did these breakdowns reflect “noise” or some systematic propensity of human nature?” p. 92
  • “Capitalist economies… are governed by an always turbulent competition driven by fear, euphoria, and herd behavior.” p. 100 – 101
  • “Antisaving propensities of keeping up with the Jonses and herd behavior-driven conspicuous consumption.” p. 201

That’s right everyone, you caused the recession.  You and your euphoric, animal spirit, herd mentality!  Suppressing the interest rate to cause savings to fall & debt-fueled over consumption to explode had NOTHING to do with it.  Now that we’ve cleared that up, moving right along.



Next, this book spends some 30+ pages on technical appendicies, tables, and charts.  It’s as if Greenspan is back as a consultant trying to confuse and distract from the fact he actually has no idea what he’s talking about…. or as he liked to brag to his reporter wife… is engaged in “syntax destruction.”

Except, in a series of odd contradictions, he then proceeds to destroy his own “syntax.”


  • “In early 2007, the composition of… corporate balance sheets and cash flows appeared in as good a shape as I ever recall.” p. 37-38
  • “It was the capital impairment of the balance sheets… that provoked the crisis.” p. 51

So in addition to “animal spirits” having caused the recession Greenspan also blames another intangible bugaboo: “shadow banking.”  However, he strangely then admits later that the things he categorizes as “shadow banks” were not the source of default:

  • “While commercial banks had their share of failures, many of the most complex dangers emanated from the so-called shadow banking system – the set of financial institutions that do not accept insured deposits and hence heretofore had been largely unregulated.”  p. 39
  • “But not all shadow banking was devastated.  Unaffiliated hedge funds, by and large, weathered the storm.  To my knowledge, none of the larger funds failed.” p. 39
  • “Unaffiliated hedge funds have weathered the crisis – as extreme a real-life stress test as one can construct – without taxpayer assistance or, as I noted earlier, default…. hedge funds are only lightly regulated.” p. 104

In this next nugget Greenspan, who oversaw the Federal Reserve system, admits the banking system was safer pre-Fed:

  • “In the 1840s, for example, US (state) banks had to maintain a capital buffer in excess of 50% of assets in order to create willing holders of their notes.” p. 41
  • “In the century that followed, the necessary capital buffer declined… finally, in later years, the emergence of various government safety nets reduced the need for capital.” p. 41
  • “The marked risk taking of a decade ago could have been guarded against wholly by increased capital.  Regrettably that did not occur.” p.43
  • (Greenspan fails to mention the Federal Reserve sets capital requirements – opps).





Throughout the book Greenspan sometimes cites one tiny sentence from meeting minute notes that he made at different Fed meetings as a defense for his actions.  If he actually believed these statements he’d have enacted very different policies.  Here is one such example:

“I did raise an early caution flag before a Federal Reserve Open Market Committee meeting in 2002 when I asserted that “our extraordinary housing boom… financed by very large increases in mortgage debt, cannot continue indefinitely.” p. 49

Except Greenspan then forced interest rates artificially low for 2 more years after that comment!

The results of Greenspan’s artificially low interest rate:

“Bankers, like all asset managers, try to avoid a heavy concentration of related assets in highly leveraged portfolios in order to avoid the risk that they will all turn sour simultaneously.  Nonetheless, such a concentration of assets – securitized mortgages – did end up on the balance sheets of innumerable banks.” p. 52

Now that we’ve blamed human cattle and the shadows, why not keep going?

“Presumably knowledgeable bankers judged the assets, at acquisition, sufficiently sound to leverage them.” p. 52.

Guess they figured a presumably knowledgeable Fed Chairman wouldn’t create a credit bubble by suppressing interest rates.  To this day Greenspan still believes his models were right:

“To this day its hard to find fault with the conceptual framework of our models.” p. 44, Chapter 2: The Crisis Begins