Would you be surprised if Alan Greenspan said regulation is bad and free markets are good?:
Repel the calls to contain competitive markets, by Alan Greenspan, Commentary, Financial Times: ...Globalisation is at the root of the past decade’s unprecedented surge in world economic activity. ... The economic edifice – market capitalism – that has fostered this expansion is now being pilloried... Regulation, the alleged effective solution to today’s crisis, has never been able to eliminate history’s crises. ... When the current crisis emerged, it was assumed that the weak links would be unregulated hedge and private funds. The losses, however, have been predominately in the most heavily regulated institutions – banks.
We may not easily confront or accept the price dynamics of home and equity prices, but we can fend off cries of political despair which counsel the containment of competitive markets. It is essential that we do so. The remarkably strong performance of the world economy since the near universal adoption of market capitalism is testament to the benefits of increasing economic flexibility.
It has become hard for democratic societies accustomed to prosperity to see it as anything other than the result of their deft political management. ... The danger is that some governments, bedevilled by emerging inflationary forces, will endeavour to reassert their grip on economic affairs. If that becomes widespread, globalisation could reverse – at awesome cost. [More here.]
Update: "Stations of the Bubble":
(A meditation inspired by Alan Greenspan’s sententious warning against financial regulation.)
Oct. 2004: “Overall, while local economies may experience significant speculative price imbalances, a national severe price distortion seems most unlikely in the United States”
June 2005: “Although we certainly cannot rule out home price declines, especially in some local markets, these declines, were they to occur, likely would not have substantial macroeconomic implications.”
And let’s not forget this classic call:
October 2006: “I suspect that we are coming to the end of this downtrend, as applications for new mortgages, the most important series, have flattened out,”