Maestro: Alan Greenspan and the American Economy
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In eight Tuesdays each year, Federal Reserve chairman Alan Greenspan convenes a small committee to set the short-term interest rate that can move through the American and world economies like an electric jolt. As much as any, the committee's actions determine the economic well-being of every American. The availability of money for business or consumer loans, mortgages, job creation and overall national economic growth flows from those decisions. Perhaps the last Washington secret is how the Federal Reserve and its enigmatic chairman, Alan Greenspan, operate. In Maestro, Bob Woodward takes you inside the Fed and Greenspan's thinking. We listen to the Fed's internal debates as the American economy is pushed into a historic 10-year expansion while the world economy lurches from financial crisis to financial crisis. Greenspan plays a sometimes subtle, sometimes blunt behind-the-scenes role. He appears in Maestro up close as never before -- alternately nervous and calm, plunging into mathematics one moment and politics the next, skeptical, dispassionate, always struggling -- often alone.
Maestro traces a fascinating intellectual journey as Greenspan, an old-school anti-inflation hawk of the traditional economy, is among the first to realize the potential in the modern, high-productivity new economy -- the foundation of the current American boom. Woodward's account of the Greenspan years is a remarkable portrait of a man who has become the symbol of American economic preeminence.
key executive in the Chicago options exchange, who said the market there was about to collapse as well. “Calm down,” Greenspan said. “It’s containable. Don’t worry, don’t panic.” He was fascinated to see how powerful people functioned under stress. It reminded him of the Apollo 13 astronauts who successfully repaired their spacecraft in outer space by manufacturing a replacement part they had not brought along. Does your mind or psyche freeze over? he wondered. He was going to find out. He also
the sense of trust.” Jim Baker didn’t necessarily want a puppet. He just wanted a Republican. It was not a matter of trust, it was a matter of good politics. He also wanted a Fed chairman with a more agreeable temperament. Volcker’s crankiness and his I’m-above-politics air were hard to take. Baker had an ability to establish nearly instantaneous, automatic trust with most people. With a confiding, even impish smile he could find common ground effortlessly, most often by adapting to the other
we are surely going to get for this move.” Blinder would go along with the rate hike, but he made it clear that he would stand strongly against raising rates again at the next meeting. “Okay,” Greenspan said, right on the tail of Blinder’s long speech about his struggle. “I propose that we move ¾ percent.” All 12 members voted yes. Blinder had gone with the chairman because he didn’t want to use the power of his dissent on what could be seen as a tactical dispute. The practical difference
more. It was the same principle that former chairman of the Joint Chiefs of Staff, General Colin Powell, had applied in the 1991 Gulf War. Powell’s doctrine of overwhelming military force called for sending enough to guarantee success. There were no absolute guarantees in a foreign debt crisis, but Greenspan had a refinement of the principle: Send enough to reduce the probability of failure to below your point of tolerance. If they tried and failed, it would send an awful message to the world and
administration and Greenspan didn’t let the economy get out of control. It wasn’t science, Rubin knew, but he believed Greenspan was making a series of highly informed judgments—the best they had. White House pressure to cut rates could have the opposite impact and actually prevent a rate cut. In addition, Panetta, the former Clinton budget director, was too often acting as if he were the primary economic policy spokesman—to let people know he was the man. As treasury secretary, Rubin was the