OT/The 1992 Greenspan recession
salonmag.com
" after all, he has done it before. After President Bush reappointed
him to a second term, he repaid his benefactor with the recession,
whose tail end in 1992 practically ensured Clinton's election.
(Remember, "It's the economy, Stupid!"? It should have read "It's
Alan Greenspan, Stupid!"). He raised interest rates and brought
about the recession because unemployment had dropped to 5.5
percent, which meant that it was hovering on the edge of the
NAIR, the non-accelerating inflation rate of unemployment.
businessweek.com
" To signal his independence from the Reagan White House, Greenspan engineered
a sharp rate increase at his first FOMC meeting--a move that critics believe
contributed to the Oct. 19, 1987, stock market crash. But he quickly won kudos
on Wall Street and in Washington for his calm handling of the crisis: The Fed chief
headed off a full-blown panic by promising that the Fed would provide as much
liquidity as needed to keep the nation's financial institutions solvent.
SNIPING. Any praise for Greenspan from the White House soon died down,
however. On the eve of the GOP convention in the summer of 1988, the Fed
raised interest rates, upsetting GOP Presidential nominee George Bush and
foreshadowing four years of sniping from the Bush Administration.
Fed watchers say Greenspan wasn't trying to distance himself from Bush so much
as responding to what he perceived as growing inflationary pressures. But
Greenspan overestimated the strength of the economy in the early 1990s and was
too slow to lower rates after Iraq invaded Kuwait and consumer confidence
plunged. The result: a recession and the most sluggish recovery in modern times.
To some Bush officials, Greenspan's anti-inflation zeal caused the President's
defeat in 1992. "
TA |
