Greenspan's shock: oil behind Iraq invasion

Greenspan's shock: oil behind Iraq invasion
Email Print Normal font Large font Jeannine Aversa and Ann Sanner Washington
September 17, 2007


Former Federal Reserve Board Chairman Alan Greenspan.
Photo: J. Scott Applewhite

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AdvertisementTHE US went to war in Iraq motivated largely by oil, former US Federal Reserve chairman Alan Greenspan says in a memoir to be released today.

"I am saddened that it is politically inconvenient to acknowledge what everyone knows: the Iraq war is largely about oil," he writes.

Mr Greenspan's book The Age of Turbulence: Adventures in a New World also criticises President George Bush for not responsibly handling the nation's spending and racking up big budget deficits.

The 81-year-old, a lifelong Republican, claims Mr Bush has abandoned fiscal discipline and put politics ahead of economics.

Denouncing the tax cuts brought in by Mr Bush, Mr Greenspan says the Republicans deserved to lose the congressional elections last November because they abandoned fiscal discipline and hugely swelled the US budget deficit.

He says he was surprised Mr Bush was unwilling to temper his campaign promises with fiscal reality once elected in 2000, as previous Republican administrations had done.

"Little value was placed on rigorous economic policy debate or the weighing of long-term consequences," he says.

Mr Greenspan built his reputation with his calm handling of the stockmarket crash of 1987, the 1997-98 Asian and Russian financial crises, and the economic turbulence that followed the September 11, 2001, attacks on the US.

But he has also come under fire for policies that some say led to bubbles in technology and housing. His successor, Ben Bernanke, is coping with a prolonged housing downturn and credit-market turbulence. Mr Greenspan's long association with Republican administrations and his reputation for independence add clout to his criticism. He ran the Fed for 18½ years and was the second-longest-serving chief. He writes that he laments the loss of fiscal discipline.

Mr Bush took office in 2001, the last time the Government produced a budget surplus. In 2004, the deficit was a record $US413 billion ($A490 billion). "The Republicans in Congress lost their way," Greenspan writes. "They swapped principle for power. They ended up with neither. They deserved to lose."

The White House defended its fiscal policies. "Clearly those tax cuts proved to be the right medicine for an ailing economy," spokesman Tony Fratto said.

"Tax cuts contributed a portion to early deficits, but … accelerated growth over time, leading to increased business activity, increased job growth and increased tax receipts, which today have us at low historic deficit levels and on a path to a surplus."

On the spending side, Mr Fratto said: "We're not going to apologise for increased spending to protect our national security."

AP, REUTERS, TELEGRAPH