Greenspan's warning

Alan Greenspan, former chairmain of the US Federal Reserve, sketches in the Financial Times a gloomy picture of the ongoing bank crisis, yet warns strongly against further state intervention: "This crisis is different – a once or twice a century event deeply rooted in fears of insolvency of major financial institutions. ... There may be numbers of banks and other financial institutions that, at the edge of defaulting, will end up being bailed out by governments. ... Globalisation is at the root of the past decade's unprecedented surge in world economic activity. ... The economic edifice - market capitalism - that has fostered this expansion is now being pilloried for the pause and partial retrenchment. The cause of our economic despair, however, is human nature's propensity to sway from fear to euphoria and back, a condition that no economic paradigm has proved capable of suppressing. ... We can fend off cries of political despair which counsel the containment of competitive markets. It is essential that we do so. ... The danger is that some governments, bedevilled by emerging inflationary forces, will endeavour to reassert their grip on economic affairs. If that becomes widespread, globalisation could reverse – at awesome cost."

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