Alan Greenspan Essay

That's why it's helpful for him to cultivate an air of mystery and authority, to seem beyond the comprehension of the masses. What is remarkable about Greenspan is not how well he has mastered this bit of image broadcasting, becoming the most exalted Fed chairman in history, earning the nickname Maestro and a renown that borders on celebrity.

It is not even the great skill with which he has used his fame for influence, overseeing one of the longest periods of growth in American history, doubling the size of the economy, and keeping inflation almost nonexistent.

Having served six presidents in four different jobs, he has become one of the most entrenched, powerful figures in Washington, yet he remains one of the most opaque.

Even when he does speak publicly, he says very little: Twice a year, he emerges from the labyrinth of the Federal Reserve building on C Street and, with his trademark scowl, shuffles down the aisles of Congress to testify about the Fed, the economy, the dollar…but most of the time, nobody can figure out what, exactly, he is saying."Financial capital raised in markets or generated from internal cash flow from existing plant and equipment must be continuously directed by firms,"he will say to a chamber of bewildered senators.

“Under his watch, we’ve had the two of the longest expansions in our economic history broken by two of the briefest recessions,” said Denver financier David Jones.

Lyle Gramley, a Fed governor during the 1980s, also had positive things to say about Greenspan.

So if Greenspan raises the federalfunds rate by one percentage point, mortgage rates and business loans will usually rise a point, too; if he brings the funds rate down, banks will lower their rates, which floods the market with borrowed money and gives the economy a boost.

This is purely a matter of convention—and nothing in the law requires lenders to follow Greenspan so closely, but the fact that they do gives him a reach into the economy that far exceeds his institutional power.

There is nothing to figure out, they say, because Greenspan isn't saying anything.

As his friend of fifty years, Charles Brunie, recalls, "Before he took office, he said, ' If ever you think you understand me, you will be mistaken, because I plan to obfuscate.' I remember the word "Or as Greenspan's tennis partner and former Clinton aide, Gene Sperling, explains, "When he's sending a vague or mid signal, it is by design."Or as Greenspan's old friend, the economist Milton Friedman, puts it, "I don't think it's an accident, whether he's ambiguous or not."According to sources at the Fed, Greenspan even takes pleasure in his obfuscation.


Comments Alan Greenspan Essay

The Latest from ©