A Latter-Day John Law

The brilliant economist John Law (1671-1729) is most often associated with the Mississippi Company Bubble, which remains one of the most dramatic examples of wild financial speculation gone bust.  After the collapse of the Mississippi Company mobs ran through the streets of Paris looking for his head.  At one point a woman was killed who merely resembled Law's wife!  But to be fair to Law he was not obviously a scoundrel.  In fact, his biggest crime, it could be said, was to create something so ingenious, the concept of the publicly held share, that everyone wanted a part.  Manic speculation was, therefore, an unsurprising byproduct of this novel financial instrument. The timing was also conducive to this. Law, the Englishman, arrived in Paris at a time of extreme corruption and financial duress.  One reason that Law's investments were in such demand was that, unlike everyone else, he was not a fraud.  This is, at least, my interpretation from reading the classic "Extraordinary Popular Delusions & The Madness of Crowds".

So is it possible that Alan Greenspan, the blower of multiple bubbles, will be remembered the same way?  Here is Barry Ritholtz in an entry called The "Greatest Irony" is that he is Called The Maestro:

PIMCO's Paul McCulley lays out a surprisingly stark bitchslapping smackdown on Easy Al Greenspan. First, he quotes the Maestro:

"In perhaps what must be the greatest irony of economic policymaking, success at stabilization carries its own risks. Monetary policy–in fact, all economic policy–to the extent that it is successful over a prolonged period, will reduce economic variability and, hence, perceived credit risk and interest rate term premiums."

This quote is actually one of a series of statements from the departing Fed Chair essentially claiming that we get Bubbles because Greenie did his job so damned well.

If you'll recall, we made the same Maestro point about a month ago.  It's also interesting that Greenspan may end up being vilified for the same reason as Law, because he was too good at his job.  Fortunately, we tend not to have violent mob behavior the way did in Law's day so the slings and arrows of our outrageous fortune may not literally go after Greenspan's head.