Alan Greenspan, former Fed chairman this year demonstrated yet again, how little he understands historical US trends:

“Greenspan Says (current) Crisis ‘By Far’ the Worst…”

A real estate led crisis is always described as ‘the worst, by far’.  Until the next one.   Here is what Greenspan himself said, in January of 1990, whilst summing up at his appearance before the Joint Economic Committee:

“… such imbalances and dislocations as we see in the economy today probably do not suggest anything more than a temporary hesitation in the continuing expansion of the economy.”

In August of the same year, Greenspan continued further:

“There are several things that we can stipulate with some degree of certainty: namely, that those who argue that we are already in recession … are reasonably certain to be wrong.”

The National Bureau of Economic Research subsequently went on to date the start of that year’s recession at July, with Greenspan’s Fed going on to cut short-term rates 24 times in succession in a desperate bid to shore up market confidence, stop the recession, save the banking system from collapse and reflate the economy.  GAO director Harold Valentine, describing the bank and thrift fraud to a Senate Committee on Banking, Finance and Urban Affairs, Sub-committee on Consumer and Regulatory Affairs, just a year later, said of the economic times: “perhaps the most significant financial crisis in this nation’s history.”

In 1974, after the collapse of Franklin National Bank, one of the largest in the country, (and of the hundreds of collapsed banks that went in the year before it), Federal Reserve Board Chairman Arthur Burns, when talking to a Newsday reporter in late 1974, when asked what he had done to stop a worldwide financial panic, replied:

Luck, more than anything.  We were sitting on a volcano.  People were concerned in this country, but they were really scared abroad.  We can’t let it happen again, because we might not be so lucky the next time.”

1932, we all know what happened; the great depression.  Everybody agrees it was the worst, by far.  But of course they said that about 1893 too, described in my book:  The Secret Life of Real Estate and Banking.

http://www.amazon.com/Secret-Life-Real-Estate-Banking/dp/0856832634

Describing the financial collapse of 1857, (after real estate prices had already collapsed), J.S. Gibbons (The Banks of New York) rounded out his summary of events thus: “Such is the outline of the most extraordinary, violent and destructive financial panic ever experienced in this country.”

Of 1837, the New York Herald wrote: “The United States were never in such a perilous condition as they are at this moment.

Worse even than after the global financial crisis of 1819, brought on by a land price collapse.  Said Murray Rothbard (A History of Money and Banking in the United States) of 1820:

Western areas, shorn of money by the collapse of the previously swollen debt, often returned to barter conditions, and grain and whisky were used as media of exchange.

Greenspan would do well to study American history; a history littered with financial crisis brought on by a real estate collapse, each one having been described as the worst, by far.