Did Alan Greenspan cause the Chinese stock market to collapse?

Former Fed Chairman Alan Greenspan famously warned against "irrational exuberance" as the dot com bubble neared its peak, but nothing he did succeeded in doing over the next year stopped the bubble from popping disastrously. Now that he has moved into the private sector as a consultant writ large to the world of wealthy investors concerned about the direction of the global economy, Greenspan sees another bubble on the horizon: China.

China's stock market has been growing like crazy over the past year and a half. While the underlying economy of the nation has witnessed a spectacular 10% growth rate, the stock market has soared ahead. The Chinese stock market more than doubled in 2006, and rose more than 50% from there at the beginning of 2007.

Alan Greenspan's initial comments about the Chinese economy sparked an immediate drop in the Chinese stock market that reverberated around the world. In a global economy increasingly independent of the influence of the United States, many investors feared that an unorderly collapse of China's markets could destroy prospects for global growth this year.

Now that investor's have had enough time to digest Greenspan's analysis and react accordingly, it is clear that Greenspan was on to something with regard to China. China's stock market has fallen back significantly from its heights and the rest of the world economy has shrugged off China's downturn.

Greenspan spent years at the head of the Fed in a position to access information most investors can't access. But his current role as consultant doesn't offer him any information not available to others. Rather, Greenspan has simply pointed out what everyone should have already known.

Alan Greenspan couldn't stop the dot com bust, but now that he is out of power, his influence has actually grown. No longer confined to economic doubletalk so incomprehensible that the press dubbed it "Greenspeak", Alan Greenspan can finally speak his mind. Many pundits in the financial press and his successors at world financial institutions are concerned that Greenspan is just trying to make a few bucks now that he is no longer the world's chief financial guru. It seems like Greenspan may regain much of the luster he lost with the last recession at the expense of another downturn overseas.