Amity Shlaes reports on former Federal Reserve Chairman Alan Greenspan’s forthcoming paper with the underlying conclusion that:

Government squeezes out growth. …

Greenspan posits that failure by companies to choose to raise levels of [long-term fixed-asset] investment[s] since 2008 is evidence of their concern about an unpredictable and overly activist federal government. 

I much prefer for Greenspan to spread this viewpoint, over a 2008 statement of his, which in light of the hardships imposed by the recent financial crisis, continues to makes me cringe:

[The] loosening of mortgage credit terms for subprime borrowers increase financial risk, and the subsidized homeownership initiatives distort market outcomes. But […] the benefits of broadened homeownership are worth the risk.

How much risk is increased homeownership really worth when the end-result of the distorting policies is that the new homeowners, no sooner than they move into their new homes through the front door, are already being pushed out by foreclosures at the backend?

Nonetheless, Greenspans’s new message in his forthcoming academic paper is an important one, especially at this time characterized by unsustainably high government debt. An overly activist government in love with stimulus money more likely hampered, rather than stimulated, the economic recovery. Nevertheless, as Shlaes points out, an academic paper, no matter how important its message, is unlikely going to be a widely accessible medium. The good news are that a fascinating, long-awaited movie is about to come out that will do that job. According to Shlaes:

That medium is “Atlas Shrugged: Part I,” a movie set for release in the U.S. April 15. The film adapts “Atlas Shrugged,” a steamy libertarian novel featuring the ultimate corporate long-term illiquid investment, railroads. …

Putting the document side by side with excerpts from “Atlas Shrugged” is revealing.

Greenspan: “The defining characteristic of the tepid recovery in the United States that followed the post-Lehman freefall is the degree of risk aversion to investment in illiquid fixed capital unmatched, in peacetime, since 1940.”

Executive to boss in “Atlas Shrugged”: “Jim, there isn’t going to be any new track.”

Greenspan: “Most stimulus programs seek those appropriations and tax cuts most likely to be quickly spent. But if they were all completely spent, presumably the ideal, then of necessity saving would be zero. Yet in that case no production would have been diverted to foster innovations that increase output per hour and standards of living.”

Dagny Taggart: “If the road could afford it, I would scrap every piece of rail over the whole system and replace it with Rearden Metal. All of it needs replacing. None of it will last much longer. But we can’t afford it.”

Greenspan: “Henceforth, it will be exceedingly difficult to contain the range of possible activism. Promises of future government restraint will not be believed by markets. This must significantly further raise negative tail risk.”

“Atlas Shrugged”: Train wreck.

Greenspan: “The ‘wealth effect’ could effectively substitute private ‘stimulus’ for public.”

“Atlas Shrugged”: Sex scene in tunnel, delivered via verb-free expressionistic clauses: “Then, the sparkle of her diamond clip against the trembling copper of his hair.”

Devoted Randians and those disappointed by the monetary policy of Greenspan and his successor, Ben Bernanke, point out yet another “Atlas Shrugged” scene: the famous money speech of Francisco d’Anconia: “Whenever destroyers appear among men, they start by destroying money, for money is men’s protection and the base of moral existence. Destroyers seize gold and leave to its owners a counterfeit pile of paper.”

Also, check out the recent movie review by my colleague Hadley Heath who could relate to the protagonist Dagny Taggart as:

She feels utterly alone in a struggle against a tanked economy and an overbearing government.  Sound familiar?