Thursday, 23 March 2006

Greenspan not as good as gold

Alan Greenspan's performance and his legacy as Head of the Fed is reviewed by Richard Salsman. Of his legacy, says Salsman:

Greenspan left no “legacy” that could be defined, other than this: he established as a norm the vicious pattern whereby the Fed chairman is deemed worthy of speaking on every topic under the sun, of monitoring every possible variable (hence none) and of doing whatever he wishes, free of oversight. There was no “Greenspan Standard” – and this was the great failure of his reign. Given his knowledge, Greenspan knew better than to leave the U.S. dollar in a standard-less state.

There’s only one reason a central planner does whatever he wishes, willfully obfuscates his aims, deliberately deceives questioners and operates unaccountably: because he’s a power-luster.
And of his performance:
Greenspan’s track record (August 1987-January 2006) looks favorable only compared to the pathetic performance of his immediate predecessors...

In a recent study, my firm compared these distinct, 18½-year eras: 1) the Greenspan-led Fed (1987-2006), 2) the non-Greenspan Fed (1969-1987) and 3) the gold-based Fed (1950-1969). Whether measuring the U.S. economic growth rate, inflation, interest rates, commodity prices, real wages, productivity, unemployment or equities, we found that U.S. economic-financial performance under the Greenspan Fed was less-bad than it was under the non-Greenspan Fed, but performance was spectacular and superior under the gold-based Fed compared to each of the others.
As Salsman points out, Greenspan was a strong advocate of a Gold Standard before becoming the US's top Central Banker, but not thereafter, and as an alternative to the Gold Standard as guardian of the dollar's purchasing power he was, well, lacklustre:
This was the man universally acclaimed for his astute knowledge of the data. Yet during his tenure the U.S. Consumer Price Index rose from 114 to 198. The reciprocals of these numbers provide a rough measure of the dollar’s power to purchase a representative basket of goods. Fact: the dollar’s purchasing power declined 43% on Greenspan’s watch. No such thing ever happened under the gold standard. Why did he never mention this? No central banker – least of all Alan Greenspan – has ever served as the “guardian” of the purchasing power of the currency he issues. He’s the proverbial fox guarding the henhouse.
As Salsman pooints out: "Forget the collapse of the U.S.S.R. – allegiance to central planning lives on in academia, the Fed and Wall Street." It lives on too at No 1, The Terrace.

LINK: Alan Greenspan's Record as FED Chairman: Better Than Predecessors, Not As Good as Gold - Richard Salsman, Capitalism Magazine

TAGS: Economics, Politics, Politics-US

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