>> I would posit that Greenspan doesn't care a whit what history thinks of him. His general philosophy (rooted in Objectivism) has little to do with ego, but rather managing things responsibly. <<
Ahhhh, ya, if you say so... since he was in Ayn Rand's circle, i'm sure the man get rid of his pride long ago (cough).
>> Hell, he spent 3 years trying to prick the stock market bubble. <<
Really!!! That's interesting.
From the Washington Post:
washingtonpost.com
But behind closed doors, back in 1997, a fierce battle was raging at the Federal Reserve Board over whether the central bank should use its interest rate powers to cool what many policymakers felt was an overheated economy and a speculative stock market, according to transcripts of the Fed's 1997 policy meetings, released yesterday.
[snip]
At a decisive meeting in May 1997, Fed governor Laurence H. Meyer and nearly all of the Fed's regional bank presidents demanded that the Fed get "ahead of the curve" with the first of what they expected would be a series of rate hikes to slow the economy.
Cathy E. Minehan, president of the Boston Fed, warned that without some signal that the Fed was prepared to curtail speculation in stocks and real estate there would soon be a dangerous investment bubble.
"We need to reduce the risk of overshooting, and if we do not do it at a time of fast growth and tight labor markets, when will we do it?" she asked the other committee members.
But Greenspan, who at the previous meeting had all but promised the "inflation hawks" he could support a rate hike, surprised them by presenting a controversial new theory: that a dramatic rise in productivity stemming from technological advances would allow the economy to grow much faster than in the past without triggering inflation.
"Something quite fundamental is happening," Greenspan said, arguing that the committee hold off at least until the next meeting. When the votes were tallied, only one voting member of the committee decided to go public with his dissent by voting against Greenspan's motion to hold interest rates steady.
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And from the mintues: federalreserve.gov
From Cathy Minehan: “What if we were to tighten now by 25 basis points and we were wrong and everything started to come in at least as well as the Greenbook sees it, and maybe even a little slower? Are the costs of being wrong in that way unacceptably high? I do not think so, and one of the reasons has to do with the argument of the psychological impact on the markets. I meet with a group of investment managers on a fairly regular basis. Their discussions in recent weeks have continually focused on the availability of credit, the liquidity of the markets, and the excesses that they see everywhere, particularly when it comes to commercial real estate financing. Rather than feeding a sense of caution through uncertainty about our actions, I think that not moving at this meeting or certainly not moving soon will lead to a greater level of certainty among market participants that they can persist in their excessive activities and that will feed into more speculation in the asset markets than is healthy.
From Alfred Broaddus:” With respect to productivity, I am glad that you have highlighted it today, Mr. Chairman. I think you are providing a very useful service not only to the Committee but to the country in emphasizing that we may well be in the midst of a significant increase in trend productivity growth…As always, policy is a matter of balancing the risks. Let me tell you that I recognize the risk in moving today. But I think there is also a substantial risk, in my view a greater risk, if we do not move now.
From Jerry Jordan: “For me, the policy issue is not a question of a little now or a little later. It may turn out to be a question of a little now or a whole lot later….I agree that there are a lot of similarities to the 1920s. I just do not want it to end the same way. [Laughter]
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