History Forum / General / General Topics / May 2004

WASHINGTON TIMES
Editorial
May 23, 2004

The extraordinary Greenspan

"Entranced by sound" at an early age, 78-year-old Federal Reserve
Chairman Alan Greenspan confided to an assembly of teenagers the other
day that when he was their age, he visualized himself "playing with
the likes of the Glenn Miller orchestra or becoming another Benny
Goodman." After practicing the clarinet and saxophone for three to
five hours a day, young Alan graduated from high school and toured the
country with a dance band for a couple of years. Forsaking a career as
a professional musician, Mr. Greenspan enrolled at New York
University, where he received his B.A., M.A. and Ph.D. in economics.
On Tuesday, President Bush followed through on a commitment made last
year and renominated Mr. Greenspan to another four-year term as
chairman of the Fed, which he has headed since the summer of 1987.
   Mr. Greenspan undoubtedly would be the first to say that the music
industry easily managed to survive and prosper for more than half a
century without him. But it is quite unlikely that the American and
world economies would have experienced such good fortunes as they have
over the past 20 years were Mr. Greenspan not leading the world's most
powerful central bank for nearly all that time. Indeed, within months
of assuming the chairmanship, Mr. Greenspan successfully confronted
1987's "Black Monday" stock-market plunge, which, if handled
improperly, could easily have plunged the nation and the world into a
deep recession.


   "Deep recession"? Now, "deep recession" is a phrase one never
associates with Mr. Greenspan. To the contrary: His 17-year tenure at
the Fed's helm has been associated with the two longest peacetime
economic expansions since the 1850s. Moreover, the two eight-month
recessions that ended these record expansions were among the briefest,
most mild downturns throughout the same 150-year period. The cyclical
peaks of the unemployment rate for the 1973-75 and 1981-82 recessions
reached 9 percent and 10.8 percent, respectively, compared to 7.8
percent and 6.3 percent in the aftermath of the much shallower 1990-91
and 2001 recessions.
   The Asian financial crisis of 1997-98 nearly brought the world
economy to the precipice, a potentially catastrophic development that
Mr. Greenspan principally averted. He continued to guide the American
economy through a major expansion during the second half of the 1990s.
That record-shattering expansion served as the world economy's
indispensable engine, keeping Japan's struggling, once-invincible
economy above water and providing a market for Europe's export-driven
acceleration. In recent years, Mr. Greenspan and his Fed colleagues
have managed to achieve de facto price stability, succeeding so well
that disinflationary pressures threatened to evolve into outright
deflation. In recent months, however, he has achieved apparent success
in defusing the deflationary threat.
   Mr. Greenspan has managed to successfully deal with all of these
potential and actual crises while guiding the U.S. and world economies
through an evolving economic paradigm that, in his perceptive view,
has been "encompassing globalization and innovation far more than in
earlier decades." Considering the complicating factors involving
September 11, the corporate-governance scandals and the stock-market
and business-investment collapses, Mr. Greenspan has performed all the
more remarkably in recent years. Knowing he plans to remain Fed
chairman at least through his 14-year term, which ends Jan. 31, 2006,
should be a source of comfort to one and all.