Forecasts & Strategies
Is Alan Greenspan Really That Good?
By Mark Skousen
“He played the game, skillfully …. He helped breath life into the vision of America as strong, the best, invincible.” -Bob Woodward, Maestro: Greenspan’s Fed and the American Boom
Last month I listened on audiotape to Bob Woodward’s new book, Maestro (Simon & Schuster), the inside story of Alan Greenspan and his long tenure as chairman of the world’s most powerful central bank. Woodward gave Greenspan extremely high marks for his ability to manipulate interest rates and keep the American economy stable and growing. He also felt that Greenspan was one of the first economists to recognize the surprise jump in productivity in the United States in the early 1990s. As a result, Greenspan fought against efforts to raise interest rates during most of the 1990s.
Certainly Greenspan has achieved remarkable success as measured by the low level of price inflation in the 1990s, and his handling of various crises (1987 crash, 1990-91 recession, Long Term Capital Management fiasco and the 1997 Asian meltdown). He has also been willing to raise interest rates when the American boom appeared to be getting out of hand (1994 and 2000) and thereby engineering a soft landing.
On the negative side, I give him low marks for opposing tax cuts in the 1990s, creating an asset inflation by pumping too much money into the economy after the 1997 Asian meltdown, and buying into the Y2K computer glitch problem in 1999. He’s been too easy, too long and too tight since he’s been chairman. But by far his worse decision was before he became Fed chairman. In 1983, he chaired the Social Security reform commission and refused to even entertain the idea of privatization. Instead he raised taxes and broadened the tax base. Ayn Rand, his mentor, must have been turning over in her grave.