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Dice Have No Memory: Big Bets and Bad Economics from Paris to the Pampas by William Bonner

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Chapter 2

The Maestro’s Last Helipad

The Conspiracy of Greenspan and Bernanke

Greenspan’s Put Is Shot

December 8, 2000

Gentle reader, the whole world now turns its weary eyes to Mr. Greenspan. The financial press portrays him as the savior of the modern world. Time magazine, in fact, once put him on the cover, along with Robert Rubin and Larry Summers with this headline: “Committee To Save the World”—with no trace of humor. In Bob Woodward’s book he is the “Maestro.” Fortune ran a cover story: “In Greenspan We Trust.”

And on Tuesday, Mr. Greenspan . . . the former jazz saxophonist and Ayn Rand devotee . . . seemed to live up to his billing. “Greenspan Arrests Wall Street Collapse,” said the headline in LA Tribune. Greenspan had apparently done it. He had pulled out his put option and saved the day.

And yet . . . the dollar continues to fall. And the price of credit continues to rise. Either of these are probably sufficient to render Mr. Greenspan’s put option worthless. “Euro continues to rise,” reports the financial section of France’s Figaro newspaper. The hapless European currency has defied almost every financial pundit in the known world by doing what none of them expected—it has gone up.

So delicately balanced—at the margin—is this international flow of funds that merely a small shift in sentiment away from the dollar could be devastating. In effect, if the dollar falls—it means that foreigners will demand a higher rate of return for buying U.S. assets . . . and the cost ...

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