Now, Greenspan here is singing the same tune as Bernanke and Krugman about the current global crisis - that it is caused by developing countries amassing surpluses after they have become highly competitive in the global economies - and not that the US was printing money to disguise its loss of competitiveness.
Greenspan's argument is ingenius. The US Federal Reserve cannot be faulted in its loose monetary policy which he takes it to mean that the Fed can only the overnight rates - which, as Greenspan pointed out, are short-term rates - and short-term rates do not trigger a speculative run on long-term assets such as real estate. Only long-term rates can.
The only way that long-term rates in the US can be depressed for years is because of the excess surpluses accumulated by the developing economies and which were then reinvested in financial assets in the US. It is the abnormal tendency of developing economies to save that has caused the global crisis which was triggerd by the burst of the real-estate bubble in the US.
Where did the excess surpluses of developing economies come from, Greenspan? He conveniently overlooked his tendency to print money to solve the US economic problems. Instead, he chose to emphasize that it is not the job of the central bank to worry about where the excess money should go - because they will be micromanaging by the authorities.
Instead, he argued that the financial system should be regulated so that excess liquidity will go to productive purposes - and not unproductive purposes such as real estate.
It is clear that Greenspan is mentally stuck in his own little spin - and this could be the real reason for the global economy to be in crisis today.
I continue to maintain that the current global crisis was caused by the sustained printing of money by Greenspan for decades in order to disguise the fundamental problems of the US economy as it began to lose its competitiveness with the rise of China. The US is suffering from the same problem as faced by Japan in the 1980s. Let's hope that the US will not take as long as Japan to recover (as Japan still hasn't).