Still we could attribute much of our current mess to too many who believe they know - then later we find that even simple notions were somehow forgotten. Or a fog had set in. (- R. S. McNamara).
Despite what may be economic headlines today, Greenspan's legacy may be his contribution to our current low interest rate trap - that has lasted for much too long. Getting out of it could trigger a massive deflation of financial assets - causing an unprecedented ASSET VALUE WRITE-DOWN. Evaporating years of value in moments.
A mere 2% rise in rates, for example, could deflate financial assets by as much as 50% - wiping out the equity boxes of financial intermediaries and banks , while creating massive unfunded pension and insurance fund liabilities on the basis of marked to market accounting calculations. =ing HUGE liquidity CRUNCH.
Moreover, the total value of US federal debt could grow substantively with a mathematical pen stroke, which has little to do with deficits or economic theory and activity. And I don’t even want think about what could happen if rates should revert to levels over their historic mean; it would be devastating.
So it seems that the Maestro knew how get us into this trap, but did not know how to get us out of it - but then again "who knows?" And as far as we know, he's still on first...