Vital Signs

Grading Greenspan

President Bush’s recent announcement that he will renominate Alan Greenspan for a fifth term as chairman of the Federal Reserve Board elicited mostly favorable reactions from a wide range of economic and political pundits.

At the critical end of the spectrum, economist James Galbraith, in an op-ed entitled “Greenspan, The man who stayed too long,” called the 78-year-old Greenspan “a man who spent the first [part] of his central-banking career fighting an inflation that did not exist.”  Better targeted is Galbraith’s complaint that Greenspan has excessively turned the growth of the money supply off and on when selective credit controls would have sufficed.

More typical of public reaction is the gushy editorial by George Melloan, “The Money Man Everyone Loves,” which appeared in the Wall Street Journal.  Starting with the stock-market crash of 1987, Melloan credits Greenspan with so skillful a manipulation of the Federal Reserve that “it’s no wonder that Mr. Greenspan is widely regarded as a miracle worker . . . ”

Mr. Greenspan’s appointment by President Reagan in August 1987 followed a parade of chairmen in the 1970’s who had failed to contain inflation and, consequently, presided over stagflation.  Paul Volcker, who served from 1981 to 1987, manfully reduced the runaway inflation that he inherited but could not...

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