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Lesson for NZ in Greenspan's flawed worldview

Alliance Party says a lesson for New Zealand in Greenspan's flawed worldview

Alliance Party media release FOR IMMEDIATE RELEASE Saturday 25 October 2008

Alliance co leader Kay Murray says recent comments made by Alan Greenspan, former chairman of the US Federal Reserve, demonstrate that the world should not be run by economists and financiers.

"Mr Greenspan has claimed he was shocked at the extent of financial institutions risk taking that occurred under his term, now that the extent of the financial disaster has become apparent. He genuinely believed that the desire by institutions to protect their reputations, presumably by remaining solvent, would override the desire to make as much money as possible."

In what must be the understatement of the century so far Mr Greenspan is reported to have said there was a "flaw in the model of how I perceived the world works"

"Where has this man been all his life?" asks Ms Murray.

"Any student of psychology, sociology, or even history, could have told Mr Greenspan the likely result of deregulating the speculative, gambling culture that dominates the financial markets - which has been a breakdown of all restraint and responsibility in favour of short term plundering."

Mr Greenspan has explained that the public must not "expect infallibility" of government officials.

"With the multimillion dollar salary package that he would be getting whilst in the Federal Reserve, the public would be perfectly justified in expecting Mr Greenspan to walk on water," says Ms Murray.

Ms Murray says there is an important message here for New Zealanders in the upcoming elections.

"Do not assume that men in flash suits with big salaries, spouting facts and figures, models and theories, necessarily know what they're talking about."

"There may be a small 'flaw in the model of how they perceive the world works' that could be as devastating to New Zealand's economy as Alan Greenspan's was to the US economy."

Ms Murray says when the global economic crisis hits New Zealand, as it certainly will, it will be important for the government to be controlled by people who truly understand how the world works, not just how the financial institutions would like it to work.

These people will have to be able to prioritize spending so that costs are reduced but areas like health, education and social services, which are vital to the well being of all New Zealanders, are not touched, she says.

"Previous experience in areas such as health, education or social services and working on shoe string budgets, will be much more relevant than speculation in the casino economy."

Ms Murray says the Alliance is a party of real people with rich and varied life experiences who know how the real world works.

"We have the policies and the political will to minimize the effects of the global economic crisis. The Alliance knows that the financial institutions and global corporations are largely motivated by greed and selfishness. We do not expect them to look after anyone's interests except their own."

The Alliance will not be afraid to legislate and regulate to curb their excesses and make them into responsible citizens, she says.

The Alliance will ensure that any belt tightening and cost cutting that may be necessary, starts at the top, and that, unlike the tough times in the 1980's, those on middle and low incomes will not be the ones to bear the brunt of the economic downturn.


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