|Known as Fed Speak, the convoluted rhetoric has befuddled even the wisest of interpreters.|
|— Wealth Building Strategies in Energy, Metals and Other Markets|
In monetary policy of the United States, the term Fedspeak (also known as Greenspeak) is what Alan Blinder called "a turgid dialect of English" used by Federal Reserve Board chairmen in making intentionally wordy, vague, and ambiguous statements. The strategy, which was used most prominently by Alan Greenspan, was used to prevent financial markets from overreacting to the chairman's remarks. The coinage is an intentional parallel to Newspeak of Nineteen Eighty-Four, a novel by George Orwell.
The deliberately confusing and carefully rehearsed cryptic language described as an "indecipherable, Delphic dialect" is meant to "give people a sense that there's no way they could understand economics and finance" and thus allow the Federal Reserve and government to manage the economy with less interference from the general public.
Although Ben Bernanke has stated that Fedspeak now means clear and extensive communication of the fed's action, the original interpretation in which Fedspeak meant "explaining more, is understanding better" is still prominently used. It should also be noted that Bernanke's speech has also been described as fedspeak.
It has been noted that the nuanced nature of fedspeak poses interpretation problems to automated trading algorithms.
The notion of fed speak originated from the fact that financial markets placed a heavy value on the statements made by Federal Reserve governors, which could in turn lead to a self-fulfilling prophecy. To prevent this, the governors developed a language, termed fedspeak, in which ambiguous and cautious statements were made to purposefully obscure and detract meaning from the statement.
Though previous "Fed" chairmen Arthur Burns and Paul Volcker were known for blowing smoke, both literally and figuratively, when appearing before Congress, Alan Greenspan is credited with making Fedspeak a "high-art".
Usage by Alan Greenspan
|He used to take pride in the resulting obfuscation—even characterizing his own way of communicating as 'mumbling with great incoherence.' In a famous incident, he once told a US senator, who claimed to have understood what the famously obscurantist chairman had just said, that 'in that case, I must have mispoken.'|
|— How do central banks talk?|
Although it was originally believed by some that Alan Greenspan, who is generally credited for popularizing fedspeak, may have used such language unintentionally, he revealed in his 2007 book The Age of Turbulence, that the method of avoiding the issues directly when a clear message was not desired was indeed intentional. Greenspan states that the confusion, which often resulted in conflicting interpretations, was used to prevent unintended jolts to the markets as confusing statements were typically ignored.
He noted that he came upon the dialect while at the fed: "What I've learned at the Federal Reserve is a new language which is called 'Fed-speak.' You soon learn to mumble with great incoherence."
In an interview with 60 Minutes's Lesley Stahl on September 16, 2007, Stahl stated how "In public, Greenspan was inscrutable whenever congress asked about interest rates. He resorted to an indecipherable delphic dialect known as fedspeak" to which Greenspan responded that "I would engage in some form of syntax destruction which sounded as though I were answering the question, but in fact, had not." When Stahl noted that Greenspan's responses were "impenetrably profound" and that this resulted in "two newspapers getting opposing headlines coming out of the same hearing", Greenspan responded that "I succeeded."
It's a-- a language of purposeful obfuscation to avoid certain questions coming up, which you know you can't answer, and saying-- "I will not answer or basically no comment is, in fact, an answer." So, you end up with when, say, a Congressman asks you a question, and don't wanna say, "No comment," or "I won't answer," or something like that. So, I proceed with four or five sentences which get increasingly obscure. The Congressman thinks I answered the question and goes onto the next one.
In an interview with BusinessWeek in August 2012, when asked "about practicing the art of constructive ambiguity", Greenspan replied:
As Fed chairman, every time I expressed a view, I added or subtracted 10 basis points from the credit market. That was not helpful. But I nonetheless had to testify before Congress. On questions that were too market-sensitive to answer, “no comment” was indeed an answer. And so you construct what we used to call Fed-speak. I would hypothetically think of a little plate in front of my eyes, which was the Washington Post, the following morning’s headline, and I would catch myself in the middle of a sentence. Then, instead of just stopping, I would continue on resolving the sentence in some obscure way which made it incomprehensible. But nobody was quite sure I wasn’t saying something profound when I wasn’t. And that became the so-called Fed-speak which I became an expert on over the years. It’s a self-protection mechanism … when you’re in an environment where people are shooting questions at you, and you’ve got to be very careful about the nuances of what you’re going to say and what you don’t say.
Greenspan has been criticized for his usage of Fedspeak.
|The Fed has a language all its own, and unfortunately, the folks over at Rosetta Stone have yet to create a program to help laypeople understand what the hell the fed is talking about.|
|— Ron Insana|
As of 2011, the Federal Reserve Bank of Dallas website still maintains a "Greenspeak" page with dozens of excerpts from Greenspan's past statements as head of the Federal Reserve Bank. Each quotation has a pointer to its full context in his speech, and is posted without commentary or interpretation.
The members of the Board of Governors and the Reserve Bank presidents foresee an implicit strengthening of activity after the current rebalancing is over, although the central tendency of their individual forecasts for real GDP still shows a substantial slowdown, on balance, for the year as a whole.
Risk takers have been encouraged by a perceived increase in economic stability to reach out to more distant time horizons. But long periods of relative stability often engender unrealistic expectations of it[s] permanence and, at times, may lead to financial excess and economic stress.
I would generally expect that today in Washington DC. the probability of changes in the weather is highly uncertain, but we are monitoring the data in such a way that we will be able to update people on changes that are important.
The University of Virginia Writing Program Instructor Site offers some selected quotations from Greenspan, with a suggestion that students be given writing exercise assignments of clarifying their expression of ideas.
A public relations firm cites an example of "Greenspeak" as the statement of one of the "master practitioners of creative ambiguity over the years". The brief essay mentions two other master practitioners of obfuscation, Hubert H. Humphrey and Casey Stengel. The overall tone of the essay is one of awed admiration for a sometimes-necessary skill in obscurantism. In closing, the writer notes that, "As professional performers say, to deliberately sing off-key requires a highly skilled singer."
- Waltzek, Chris (2010-11-02). Wealth Building Strategies in Energy, Metals and Other Markets. John Wiley and Sons. p. 205. ISBN 978-0-470-63830-9. Retrieved 28 January 2011.
- Blinder, Alan S.; Studies, International Center for Monetary and Banking (2001). How do central banks talk?. Centre for Economic Policy Research. p. 66. ISBN 978-1-898128-60-1. Retrieved 5 August 2010.
- "Fed Speak Definition". Investopedia. Retrieved 5 August 2010.
- Hanley, William (August 7, 2010). "What will fly hear Fed say on Tuesday?". Financial Post. Retrieved 18 August 2010.[dead link]
- Martin, Preston; Epstein, Lita (2003-02-04). The Complete Idiot's Guide to the Federal Reserve. Alpha Books. p. 120. ISBN 978-0-02-864323-6. Retrieved 5 August 2010.
- Barrie, Scott (2003-03-04). The complete idiot's guide to market timing. Alpha Books. p. 90. ISBN 978-0-02-864498-1. Retrieved 5 August 2010.
- Jasper, William F. (Oct 29, 2007). "Taking Delight in Deception: Greenspan's "Purposeful Obfuscation"". The New American. Retrieved 10 February 2013.
- Wray, L. Randall; Forstater, Mathew (2006). Money, financial instability and stabilization policy. Edward Elgar Publishing. p. 68. ISBN 978-1-84542-474-9. Retrieved 5 August 2010.
- Phil Izzo (August 3, 2010). "Secondary Sources: Fed Watch, Bond Vigilantes, Deflation". The Wall Street Journal. Retrieved 2010-08-18.
- Lash, Herbert (Apr 27, 2011). "Bernanke press debut a puzzle for algo traders". Reuters. Retrieved 2011-05-08.
- Franks, Dale (May 2004). Slackernomics: Basic Economics for People Who Think Economics Is Boring. iUniverse. p. 102. ISBN 978-0-595-31699-1. Retrieved 5 August 2010.
- Madigan, Kathleen. "A Layman's Guide to Fedspeak". Retrieved 8/5/2010.
- Canterbery, E. Ray (2006-06-15). Alan Greenspan: the oracle behind the curtain. World Scientific. p. 36. ISBN 978-981-256-606-5. Retrieved 5 August 2010.
- Bessette, Joseph M.; Pitney Jr., John J. (1 January 2010). American Government and Politics: Deliberation, Democracy and Citizenship. Cengage Learning. p. 578. ISBN 978-0-534-53684-8. Retrieved 1 May 2011.
- Stahl, Lesley (host) (September 16, 2007). "September 16, 2007 Alan Greenspan; Swimming with Sharks". 60 Minutes. Season 39. Episode 50. http://www.cbsnews.com/video/watch/?id=3265914n. Retrieved August 16, 2012.
- Horsley, Scott (September 17, 2007). "Greenspan Memoir Critical of Republicans : NPR". NPR. NPR. Retrieved 10 January 2011.
- Dauble, Jennifer. "Former Fed Chairman Alan Greenspan speaks extensively to Maria Bartiromo". CNBC. Retrieved 17 August 2012.
- Leonard, Devin; Peter Coy (August 13, 2012-August 26, 2012). "Alan Greenspan on His Fed Legacy and the Economy". BusinessWeek: 65.
- Insana, Ron (31 December 2009). How to Make a Fortune from the Biggest Bailout in U.S. History: A Guide to the 7 Greatest Bargains from Main Street to Wall Street. Penguin. p. 117. ISBN 978-1-58333-364-8. Retrieved 28 May 2011.
- "Greenspeak". FRB Dallas [website]. Federal Reserve Bank of Dallas. Retrieved 2011-05-09.
- "Greenspeak (Quotes from Chairman Greenspan )". Federal Reserve Bank of Dallas. Retrieved 23 May 2011.
- Greenspan, Alan. "FRB: Testimony, Greenspan -- Monetary Policy Report to the Congress-- February 13, 2001". Retrieved 23 May 2011.
- "Greenspeak". UVa Writing Program Instructor Site. University of Virginia. Retrieved 2011-05-09.
- "ALAN GREENSPEAK – WHAT’D HE SAY?". MediaPrep [website]. mediaprep.com. Retrieved 2011-05-09.
- Resche, C. (1 November 2004). "Investigating 'Greenspanese': From Hedging to 'Fuzzy Transparency'". Discourse & Society 15 (6): 723–744. doi:10.1177/0957926504046502.
- Fedspeak, Remarks by Governor Ben S. Bernanke