Alan Greenspan

Alan Greenspan, KBE, PhD (born March 6, 1926) is a widely-respected American economist who served as Chairman of the Federal Reserve from August 1987 through January 2006. Appointed by President Ronald Reagan, he continued the monetarist policies put in place by his predecessor Paul Volker. He presided over a period of unprecedented growth of the United States economy.

In 2005 he announcecd his desire to retire and will be replaced as Fed Chairman by Ben Bernanke on January 31 2006.

Greenspan was lauded for his handling of the Black Monday stock market crash that occurred shortly after he first became chairman, as well as for his stewardship of the "dot-com" economic boom of the late 1990s (although he was not able to forestall the formation of a stock market bubble which collapsed in March 2000). Applauded by both Republicans and Democrats over most of his career as Fed Chairman, he came under increasing criticism by Democrats beginning in 2001 for his statements which were viewed as favoring George W. Bush's tax-reduction policies by minimizing the expected negative consequences of a ballooning Federal budget deficit. Greenspan is nonetheless a much revered figure, both on Wall Street and in Washington.

Early life

Dr. Greenspan was born to a Jewish family in New York City in 1926. He studied at Juilliard from 1943 to 1944 and is known as an accomplished saxophone player. He then attended New York University, and received a B.S in Economics (summa cum laude) in 1948, and an M.A in Economics in 1950. He was awarded a Ph.D. in Economics in 1977, although he did not complete a dissertation. On December 14, 2005 he was awarded an honorary Doctor of Commercial Science from NYU, his fourth degree from that institution.

He also attended Columbia University for advanced graduate study.

During the 1950s and 60s Greenspan was a friend of author-philosopher Ayn Rand and a proponent of her Objectivist movement, which among other things advocated unfettered capitalism as a social and economic philosophy. He wrote articles for Objectivist newsletters, and contributed several essays for Rand's 1966 book Capitalism: the Unknown Ideal. More recently however, he has been criticised by Objectivists for his actions (see below).

Before his appointment to the Federal Reserve System Board of Directors, Dr. Greenspan served as a corporate director for Aluminum Company of America (Alcoa); Automatic Data Processing, Inc.; Capital Cities/ABC, Inc.; General Foods, Inc.; J.P. Morgan & Co., Inc.; Morgan Guaranty Trust Company of New York; Mobil Corporation; and The Pittston Company.

From 1974 to 1977, he was Chairman of the Council of Economic Advisers under President Gerald Ford.

At one time, he dated TV journalist Barbara Walters. Currently he is married to TV journalist Andrea Mitchell.

Chairman of the United States Federal Reserve

On June 2, 1987 President Reagan nominated Alan Greenspan to succeed Paul Volcker. After the nomination, bond markets experienced their biggest one-day drop in 5 years. Some feared that Greenspan would be a more political chairman.^{[citation needed]} The Senate confirmed Greenspan on August 11.

Just two months after his confirmation he was faced with his first crisis- the 1987 stockmarket crash.

The most famous example of how his closely-parsed speeches affected stock markets was his December 5 1996 comment about "irrational exuberance and unduly escalating stock prices" that led Japanese stocks to fall 3.2%[1].

On May 18, 2004, he was nominated by President George W. Bush to serve for an unprecedented fifth term as Chairman of the Federal Reserve. He has been appointed to this post by Presidents Ronald Reagan, George H. W. Bush and Bill Clinton.

Greenspan's term as a member of the Board is scheduled to end on January 31, 2006, and Ben Bernanke was nominated as his successor by President Bush on October 24, 2005. Bernanke is a former Governor of the Fed, and his nomination is seen as a move to effect a smooth transition from Greenspan's leadership.

Greenspan was awarded the Presidential Medal of Freedom, the highest civilian award in the United States, on November 9, 2005 by President George W. Bush ^[2].

His honorary titles include Knight Commander of the British Empire, bestowed in 2002 and Commander of the Légion d'honneur (Legion of Honor). He married NBC journalist Andrea Mitchell in 1997.

Recent Charges of Partisanship, Alliance with President Bush

Senate minority leader Harry Reid turned heads on March 3 2005 when he attacked Mr. Greenspan as "one of the biggest political hacks we have here in Washington," [3] and called attention to, among other things, the massive deficits contributed to by the 2001 Bush tax cuts Greenspan is widely seen as having supported. Greenspan also appeared in sync with President Bush's statements of urgency in his early 2005 drive to phase out Social Security in favor of private accounts. "If we do not act now, government will eventually be left with two choices: dramatically reduce benefits or impose a massive economically ruinous tax increase," Mr Bush said. [4] "Failure to address the imbalances between our promises to future retirees and our ability to meet those promises would have severe consequences for the economy" and "something has got to give soon because we don't have the choice of not resolving this issue because of the inexorable turn of the calendar" were among Mr. Greenspan's comments later. [5]

He also echoed Bush's entreaties for bipartisanship on the supposed crisis, which most Democrats saw as pretext for an ideological assault on the government pension plan. "See, once the American people realize there's a problem, then they're going to start asking members of Congress from both parties, why aren't you doing something to fix it? And I am more than willing to sit down with people of both parties to listen to their ideas," Bush said. [6] "I guess what is missing is the fact that at this stage there has been a rather low interest in actually joining, in finding out where some of the agreements are" and "it may well be that some mechanism such as that which we employed in 1983 may be a useful mechanism," Greenspan stated, referring to a bipartisan commission in that year. [7]

Charges that Greenspan was veering beyond the Fed's purview of monetary policy into fiscal and political matters traditionally left to lawmakers became more prevalent. House minority leader Nancy Pelosi stated there were serious questions about the Fed's independence as a result of Greenspan's public statements [8]. But others disagreed: "He has been an independent player at the Fed for a long time under both parties and made an enormous positive contribution," said Senator Mitch McConnell [9].

Criticism from Objectivist Philosophers

Greenspan continues to support a gold standard and advocate laissez-faire capitalism. [10] [11] His support for a gold standard is somewhat of an irony given the Federal Reserve's role in America's fiat money. He has come under heavy criticism from Objectivist philosophers, most notably Leonard Peikoff and Harry Binswanger [12], as they believe that working for the Federal Reserve is an abandonment of Objectivist and free market principles.

Increasingly, however, some Objectivists have come to believe that, within the context of the principle of non-contradiction, that Greenspan has not abandoned these principles. These Objectivists believe that he has deliberately geared his policies toward undermining the Federal Reserve system by giving successive administrations a pool of ever-increasing public debt, which will ultimately cause a collapse of the Federal Reserve system, which in turn will clear the path to a return to a gold standard. This scenario has many parallels to Ayn Rand's 1957 novel, Atlas Shrugged, in which the American economy is laid waste by, among other events, the deliberate sabotage of the copper industry by Francisco D'Anconia. It is often cited that Ayn Rand remains Greenspan's favorite author [13].

References

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The Economist (October 15-21, 2005 issue) page 29, "After Alan"
^ 2005 Presidential Medal of Freedom recipients.

External links

Criticism

Fleck on Greenspan
Making Economic Sense - Chapter 83
http://www.buzzflash.com/hartmann/05/07/har05007.html
From Objectivists: [14], [15], [16], [17], [18], [19]

Preceded by Paul Volcker	Chairman of the Federal Reserve 1987–2006	Succeeded by Ben Bernanke