( WSJ ) - In a withering critique of his fellow Republicans, former Federal Reserve Chairman Alan Greenspan says in his memoir that the party to which he has belonged all his life deserved to lose power last year for forsaking its small-government principles.
In "The Age of Turbulence: Adventures in a New World," published by Penguin Press, Mr. Greenspan criticizes both congressional Republicans and President George W. Bush for abandoning fiscal discipline.
The book is scheduled for public release Monday. The Wall Street Journal bought a copy at a bookstore in the New York area.
Mr. Greenspan, who calls himself a "lifelong libertarian Republican," writes that he advised the White House to veto some bills to curb "out-of-control" spending while the Republicans controlled Congress. He says President Bush's failure to do so "was a major mistake." Republicans in Congress, he writes, "swapped principle for power. They ended up with neither. They deserved to lose."
Many economists say the Fed, by cutting short-term interest rates to 1% in mid-2003 and keeping them there for a year, helped foster a housing bubble that is now bursting. In his book, which was largely written before much of the recent turmoil in credit markets, Mr. Greenspan defends the policy. "We wanted to shut down the possibility of corrosive deflation," he writes. "We were willing to chance that by cutting rates we might foster a bubble, an inflationary boom of some sort, which we would subsequently have to address....It was a decision done right."
He attributes the housing boom to the end of communism, which he says unleashed hundreds of millions of workers on global markets, putting downward pressure on wages and prices, and thus on long-term interest rates.
Mr. Greenspan retired in early 2006 after 18 years as chairman of the Federal Reserve. He had served under six presidents as either Fed chairman or adviser. He now runs a private consulting company; his only formal public role is adviser to British Prime Minister Gordon Brown.