Glorifying Greenspan?

Fed Chairman Alan Greenspan still has almost six months to go, but the glorifications and hagiographies are already pouring out at high volume. Monetary policy econoblogger Mark Thoma (along with Brad DeLong) is onto them:

* Mark links to quotes from Stephen Roach, Charles Goodhart, Ravi Batra and others in What they say, The Observor, 21 August issue. Roach says:

There's an awful lot of issues he's had to cope with. He's done a masterful job in dealing with many of them. But the starting-point in terms of his legacy for me is the way in which he has failed to stop the process of asset bubbles, starting with equities and now into property.

* However he missed the accompanying article by Heather Stewart, Does the maestro sign off in credit? It's a fairly representative summary of the range of opinion, both good and bad, about his record.

*  Brad DeLong links to a "superb overview of Alan Greenspan's tenure at the Federal Reserve" by Andrew Balls in the 22 August Financial Times: "It's so good that it would take me more time to cut summary quotes from it than I have this afternoon". (Thoma also quotes it at length). The activist unafraid to depart from the rules is subscriber only, but here's a short sample:

Mr Greenspan has cemented the Fed’s anti-inflation credibility but his reputation has been built on the flexibility he has shown. The challenge for his successor will be to match Mr Greenspan’s record of getting the big calls right.

* Today Mark linked to another Financial Times article, Greenspan will leave a less activist Fed (again, subscribers only). Former IMF chief economist Kenneth Rogoff dubs Greenspan as "the Michael Jordan" of central bankers. Again, the story is quoted at length in Thoma's post (and linked to by Brad):

Alan Greenspan is the Michael Jordan/Lance Armstrong/Garry Kasparov of modern-day central bankers. … Mr Greenspan’s deft handling of the October 1987 stock market crash – only months after he took office – was bold and brilliant. He poured liquidity with abandon into a financial system that might otherwise have seized and collapsed. ... The Greenspan team executed a similar strategy in the wake of the September 11 2001 terrorist attacks… He has been no less successful in the day to day routine of monetary policy.

At the end of this week, central bankers and economists from around the world will gather for the Fed’s summer retreat in Jackson Hole, Wyoming, to give their verdict on the Greenspan era. But we can expect plenty more commentary after that. Of all the comments I have read so far, I am most in agreement with those of John East below one of Mark's posts:

My provisional thoughts on his chairmanship is that he has been too accommodative over the last few years, and spent too much of his time printing dollars. However, we should make it a golden rule not to judge such a person for at least a decade after they have retired. The consequencies (or the benefits) of their actions whilst still in office will probably take this long to unfold.

In the meantime, between now and perhaps February next year we are all going to be bombarded by obituary like eulogies singing his praises. And then, when he sadly passes on in the presumably not too distant future, we'll have to go through it all again. I'll be interested to see how many of these pieces capture the essence of this very complicated character.

Comments

[Steven Soh]

I am convinced that Alan Greenspan is a calm and clear-headed Economist as well as action-oriented fellow who has his way in handling the U.S., as well as the World Economy.

Greenspan is thoughtful and knowing every filament of the economics of the World, not to mention the U.S. He knows there is a persistent property bubble and that he knows he has to harness it but he is skilful enough to increase the federal funds rate stepwise and gradually so as to let people escape from it as well as the propert bubble to deflate so as to avoid a catastrophe that the U.S. would not be able to sustain so that I agree that Greespan should deserve his name in the history of the Fed as well as the World Economy but his independence is tarnished in trying to help George W. Bush to win the re-election by trying to inject optimisum and bolstering the American Economy irrespective of the out of control of the Current Account Deficit and the hollow-out of the purse of every American is doomed to backfire in the years ahead but most of all, Greenspan should deserve his name comparable to his predecessor, Paul Volcker who tamed the out of control Inflation Beast and I would salute Alan Greepan for his glorifying performance at the Fed.

Sincerely yours,

Steven Soh

[Edward Hugh]

I have a lot of respect for Greenspan, much, much more than I do for Trichet, or did for Duisenberg say (Mervyn King is probably the best European central banker).

I doubt you'll find Paul Krugman saying anything pleasant though :).

[anne]

http://www.nytimes.com/2005/08/29/opinion/29krugman.html

August 29, 2005

Greenspan and the Bubble
By PAUL KRUGMAN

Most of what Alan Greenspan said at last week's conference in his honor made very good sense. But his words of wisdom come too late. He's like a man who suggests leaving the barn door ajar, and then - after the horse is gone - delivers a lecture on the importance of keeping your animals properly locked up.

Regular readers know that I have never forgiven the Federal Reserve chairman for his role in creating today's budget deficit. In 2001 Mr. Greenspan, a stern fiscal taskmaster during the Clinton years, gave decisive support to the Bush administration's irresponsible tax cuts, urging Congress to reduce the federal government's revenue so that it wouldn't pay off its debt too quickly.

Since then, federal debt has soared. But as far as I can tell, Mr. Greenspan has never admitted that he gave Congress bad advice. He has, however, gone back to lecturing us about the evils of deficits.

Now, it seems, he's playing a similar game with regard to the housing bubble.

At the conference, Mr. Greenspan didn't say in plain English that house prices are way out of line. But he never says things in plain English.

What he did say, after emphasizing the recent economic importance of rising house prices, was that "this vast increase in the market value of asset claims is in part the indirect result of investors accepting lower compensation for risk. Such an increase in market value is too often viewed by market participants as structural and permanent." And he warned that "history has not dealt kindly with the aftermath of protracted periods of low-risk premiums." I believe that translates as "Beware the bursting bubble." ...

[anne]

I have less and less regard for Alan Greenspan as I listen to him to his best to undermine Soicial Security and Medicare which he helped mightly to undermine with his absurd complaints about the government budget surplus in 2001.

[Edward Hugh]

Thank you anne:

"Regular readers know that I have never forgiven the Federal Reserve chairman for his role in creating today's budget deficit."

This is the quote I was thinking about, not from this article which I hadn't seen, but in the past.

"He's like a man who suggests leaving the barn door ajar, and then - after the horse is gone - delivers a lecture on the importance of keeping your animals properly locked up."

I think this is grossly unfair you know. Krugman seems to want to have his cake and eat it. What would he have done? Raised rates sooner? But what about the weak jobs market, and the 'summer of our discontent'. You can't be advocating looser monetray policy and more government spending *and* criticise deficits and low interest rates. It just isn't coherent.

"helped mightly to undermine with his absurd complaints about the government budget surplus in 2001."

Here you may be right, maybe he did give aid and comfort to the President in 2001, and that is not the central bankers job, OTOH someone had to wake the US up to the fact that there is an ageing problem, and that something had to be done. Of course the US won't be as badly hit as some European countries are being now for many many years, so there's no need for anything draconian, just an evolving policy.