Alan Greenspan, author of The Age of Turbulence, has created some in Washington with his new memoir. AP photo
by William Neikirk
Alan Greenspan’s new book is full of odd detail. He confesses that Ayn Rand, the libertarian author and his mentor, called him “the undertaker” because of his serious manner and conservative clothing. As a boy, he collected railroad timetables, a vicarious if not nerdy way of seeing the world. Unlike most people, he wanted to get out of New York City.
The former chairman of the Federal Reserve writes that his wife, television correspondent Andrea Mitchell, jokes to friends that he proposed three times in his indecipherable “Fedspeak” before she grasped what he was saying. Wrong, said Greenspan. “Actually, I proposed five times—she missed a couple.”
For all the lightness and heaviness sprinkled through Greenspan’s memoir, “The Age of Turbulence,” this is a serious book by and about a serious man who felt secure enough to criticize President Bush and the Republican Party from which he came for failing to take fiscal discipline seriously. The GOP deserved to lose last year’s elections, he says, and Bush made a mistake in not vetoing a bill. What heresy it was to say that he is fonder of Bill Clinton than any president named Bush.
And there shouldn’t be any doubt what Secretary of State Condoleezza Rice would have done with Greenspan’s observation that the Iraqi war “is largely about oil,” a long-suspected but often-denied subtext to the conflict. But there it is, a sign that Greenspan took delight in tweaking this administration with a remark that some consider closer to the truth.
Some will be turned off by his criticism, or will say that he should have made it earlier and more publicly. Others will be bothered by the shifting tone of the book, from wry humor to heavy economic lecture, from self-deprecation to a tad of self-righteousness. It reads like three books instead of one—entertaining, challenging and ponderous—but still worth tackling for its analysis of topics like globalization, energy, aging, and the future of free markets.
Greenspan predicts that Americans will see double-digit inflation by 2030 and he worries that politicians will take away the Federal Reserve’s independence once the fiscal squeeze caused by the cost of an aging population becomes apparent. Interest rates could top 10 percent, too, he says. Yet Greenspan calls himself “deeply optimistic” about the future in spite of these challenges because Americans know how to adapt.
He left the Fed last year after nearly 20 years at the helm. The book makes clear that he grew into the job, entering as a nuts-and-bolts economist who trusted numbers more than anything else and then becoming a world financial leader with a keen instinctive feel about markets. Critics often found him too eager to intervene on behalf of financial firms, accusing him of bailing out a hedge fund, Long Term Capital Management, in 1998. It was no such thing, he says. The Fed merely facilitated a private rescue by the firm’s creditors, he writes.
His career had many big moments, but perhaps the biggest occurred shortly after he took over the job in 1987. The stock market plunged by 508 points, or 22 percent, on Oct. 19 of that year, and Greenspan tells how the Fed responded by injecting cash into the economy. He would tell worried bankers and financiers: “Calm down. It’s containable.” He urged investment banks and giant trading firms not to pull away from the market. Ultimately, the market righted itself.
There were other crises over the years and there was criticism, too. President H.W. Bush and his aides publicly blamed Greenspan for keeping interest rates too high for too long when Bush was running for re-election in 1992. Greenspan said he was relieved when the current president took over his 2000 and told him that he would not follow in his father’s footsteps in criticizing the Fed.
His book shrugs off frequent charges that the Fed’s interest rate policies led to two booms and busts, in high technology and housing. The former Fed chief essentially argues that the central bank should not be in the business of trying to burst bubbles when they are occurring. To do so would require a giant rate hike that would wipe out the “growth that we sought to protect,” he said.
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The former Fed chairman likens himself to a crisis manager, one who applies judgment and discretion to the current numbers to make a decision. Some felt that a personality cult grew up around him.
An only child, Greenspan grew up in the Washington Heights area of Manhattan, and his parents divorced soon after he was born. His father worked on Wall Street and even wrote a book about how President Roosevelt’s New Deal would bring prosperity to the land. His dad gave him a copy when he was 9. “I was totally mystified,” he wrote. “I looked at the book, read a few pages, and put it aside.”
Music and numbers turned him on. He learned to play the clarinet. Though he was not a top student at his high school, in college he took to economics and math. He landed jobs on Wall Street doing economic analysis and soon signed on to an economic consulting firm, where he truly made his mark. He came to Washington in 1974 to serve as President Ford’s chief economic adviser.
Greenspan might have come to Washington sooner. He worked on Richard Nixon’s 1968 campaign, but got turned off when the candidate called in his staff just before the GOP convention that year. “He didn’t raise his voice, but his speech was so intense and so laced with profanity that it would have made Tony Soprano blush,” he writes, and he decided against any job in the Nixon administration.
Greenspan also writes that Nixon was not merely anti-Semitic, as some have said, but in fact “he hated everybody.”
But Greenspan and President Ford grew close. In 1982, he was one of several former Ford advisers who tried to persuade Ronald Reagan’s forces to name the former president as Reagan’s running mate.
Greenspan is the Adam Smith of our time. He believes in the “invisible hand” that guides free markets and leads to greater economic growth and wealth for those willing to take risks for the reward. The Marshall Plan after World War II was not nearly the stimulant to European recovery that were private, free market, he writes. Economies change through “creative destruction” of companies and industries that become obsolete.
Surveying the world, he writes that he “doubts the long-term success” of an authoritarian, communist-driven regime in China that shuns economic and political reforms. India, he says, needs to “break the stranglehold of bureaucracy” to flourish. “Capitalism in Latin America is a struggle at best,” he says. Russia needs to diversify its economy and not rely too much on oil. Japan and Europe face huge costs to help pay for an aging population. But he doesn’t have much to say about Africa.