Alan Greenspan
Alan Greenspan Within this paper, an overview will be provided of the life of Alan Greenspan. Initially, information will be presented on Greenspan� earlier years and the later paths �s that he took that led to his involvement in US politics and monetary/economic policy. Some of the influences that Greenspan has had on monetary policy will also be reviewed. Alan Greenspan was born on March 6, 1926 in the Washington Height area of Manhattan. His father was a stockbroker and economic consultant while his mother was a full-time homemaker. His childhood was rather unremarkable with the exception of his parents divorce, after which time, he lived with his mother. During his childhood and adolescence years, Greenspan developed a love of music and became skilled in playing the clarinet and saxophone. In 1943, after graduation from high school, he attended Julliard School for one year and then dropped out to play jazz as a member of Henry Jerome and his Orchestra. By 1957, Green had left his career as a jazz saxophonist, earned a degree at New York University's School of Commerce, enrolled in and abandoned the Ph.D. program at Columbia, worked as staff economist with what today would be called a think tank, and become a partner in a Wall Street economic forecasting firm. As well, during this time period, he joined what was known as � the Collective,� a group that supported the � � philosophy of the writer Ayn Rand. Rand had an interest in objectivism, with an emphasis on rationality and individualism and Greenspan was eventually swayed from logical positivism and adopted objectivism. During this same time period, he found an economic consulting firm with William Townsend who was a bond trader. The firm, Townsend-Greenspan & Co. Inc., is said to have done well until Greenspan dissolved the partnership in 1987 to further his work with the federal government. Greenspan actually began working in the political realm after Richard Nixon appointed him as director of policy research for his 1968 presidential campaign. Following his work with Nixon, Greenspan was appointed by President Gerald Ford as chairman of his Council of Economic Advisers. During the Jimmy Carter administration, Greenspan was not involved in government activities and only returned to Washington in 1987 after President Ronald Reagan nominated him as chairman of the Federal Reserve system. Information suggests that Greenspan� political beliefs have always been �s questioned. Shortly after he was appointed to the Council of Economic Advisors, he was questioned on a news program about his stance on anti-trust laws. Even though he knew that his response would present problems for him politically, Greenspan responded honestly and indicated that he did believe that anti-trust laws should be abolished. Reportedly, he had also been questioned consistently by the Ayn Rand Institute as to his failure to implement policies that would radically free the economy while others have suggested that he has tried to implement such policies in a deceitful manner. Greenspan
has most recently been accused of attempting to facilitate a process of extreme laissezfaire capitalism while remaining opposed to Keynesian (i.e., government involvement) economics. When the US Congress placed financial services corporations under the Federal Reserve, Greenspan was identified as responsible for this move and accused of having little concern for the protection of consumers. Many have suggested that it is incongruous that the Federal Reserve is headed by Greenspan who is opposed to government involvement in economic processes. Greenspan has remained as head of the Federal Reserve throughout four presidencies. In this role, he is responsible for controlling US monetary policy via influencing shortterm interest rates. In doing so, Greenspan also influences the cost of credit to US companies and consumers. During the Clinton Administration, when President Clinton was pursuing a reduction in the deficit with the plan that reducing the deficit would lower interest rates. Much to the President� dismay, Greenspan, between �s February 1994 and February 1995, initiated seven separate tightenings of the interest rate, resulting in the rate moving from 3 percent to 6 percent. Reportedly, Greenspan was concerned that � easy monetary� policy might spark inflation and operating on the � � knowledge that monetary policy operates on the basis of a time lag from 3 months to 2 years, he began tightening the interest rate in order to prevent inflation. Even though his efforts were unpopular, Greenspan� policy ended up working with inflation dropping �s to 2.7 percent in 1996, with the rate never rising above 3 percent for the remainder of the decade. Greenspan is now recognized as having helped to set the stage for the most massive economic growth that the US has ever experienced with ongoing low inflation and steady, sustainable growth. His resulting influence on monetary policy was most readily apparent after he made statements in 1996 at a reception that was held for him. Greenspan made a remark that suggested that the stock market was overvalued and in response to this remark, stock markets throughout the world fell. Similarly, on February 11, 1999, after Greenspan again made certain remarks, the Nasdaq soared to 2,406, up 96 points, at the time its largest single-day gain. However, two weeks later, when he suggested that the economy was stretched in too many directions, the Dow dropped 145 to 9,400 while the Nasdaq fell 37 to 2,339. Reportedly, Greenspan learned to use an aide to follow the markets in real time and if it was determined that something he might say would have a negative impact on the markets, he refrain from making such remarks. While Greenspan has been attributed with playing a major role in the longest economic expansion in US history, it is said that he is also aware that if the economy crashes, he will be remembered as having influenced that as well. As Greenspan has come to recognize that almost anything he might say can impact consumers and investors, he reportedly has learned to select his words as well as actions with great care. Both Republicans and Democrats are said to have appreciation for Greenspan� s efforts � to maintain and achieve economic growth that is subtle rather than widespread. Greenspan continues to live in Washington with his second wife, journalist Andrea Mitchell. While he largely spends his days attending to monetary and economic policy, Greenspan is said to enjoy classical music, tennis, and reading the works of Ayn Rand Bradford, R.W. (1997). Alan Greenspan: Cultist? The fascinating personal history of Mr.
Pinstripe. The American Enterprise, 8, 31-40. Nader, R. (2000). Greenspan shrugged: The reserve chair� philosophy. Bay Guardian. �s Found online at: http://www.commondreams.org/views/041800-106.htmOTW004.txt. Martin, J. (2000). Greenspan: The man behind the money. CT: Perseus Books. Provenzo, N. (2002). Alan Greenspan: Ayn Rand� failed student. Capitalism �s Magazine. Found online: http://capmag.com/article.asp?ID=1821OTW002.txt.