More on the Greenspan disaster:
<<Fed Up
Bad figures and bad policy.
By NR Editors, from "The Week"
September 3, 2001 issue
During the late 1990s, Alan Greenspan seemed to obsess about the threat of "excess demand" and an "overheating economy." Supply-siders argued that rather than setting targets for economic growth, the Federal Reserve should stick to maintaining price stability. The best guide to whether inflation was on the horizon, they further argued, could be found in market prices. Since the prices of raw materials and precious metals were slumping in 2000, for example, they generally urged the Fed to loosen monetary policy rather than tighten it. The central bank, citing estimates that the economy was growing at a rapid 5-6 percent pace, tightened anyway. If the evidence of sluggish economic conditions all around us is not enough to demonstrate that Greenspan chose wrongly, we now have more evidence: It turns out that those growth figures were overestimated. The newly revised figures show that the economy grew by only 2.6 percent in 2000. Government figures are backward-looking and subject to frequent revision, unlike market prices. Instead of rubber-stamping Greenspan's picks for the Federal Reserve Board, President Bush should start appointing people who are willing to let markets guide the Fed rather than attempting the reverse.>> |
