Greenspan Unplugged

AuthorPrakash Loungani
PositionDivision Chief, IMF External Relations Department
Pages51

Page 51

Alan Greenspan

The Age of Turbulence Adventures in a New World

Penguin Group, 2007, 531 pp., $35 (cloth).

At an event promoting his new book, Alan Greenspan was asked how it felt to no longer be chairman of the Federal Reserve Board. "A bit light-headed, perhaps?" the questioner suggested. "No," Greenspan responded, "light-shouldered." Reading this book, one senses Greenspan's relief that after nearly two decades of weighing every decision and word, he has finally been able to spill out almost two hundred thousand words of his choice.

The book splits evenly into an autobiography and a series of essays on economic issues. The former is a book in itself and makes for compelling reading. Greenspan tells the story of his life in a simple and engaging way. Growing up in New York City, he was obsessed with math and music, along with New York Yankees baseball. "I learned fractions doing batting averages: 3 for 11 was .273," he writes.

Jazz musician turned economist

Greenspan first wanted to be a jazz musician. Touring with the Henry Jerome Orchestra, he was known as "the band's intellectual" because he would read books about stock markets and financiers between sets. It wasn't long before he gave up on a career in music and turned to economics. Two famous economists, Geoffrey Moore and Arthur Burns, were early influences. From Moore, Greenspan acquired an interest in the nuts and bolts of the American economy, and from Burns the belief that markets had the capacity to self-correct. Greenspan's support of laissez-faire was cemented by what he calls "a meeting of the minds-mostly my mind meeting hers"-with philosopher Ayn Rand.

Greenspan found his calling as a business consultant starting in the 1950s. Over the next two decades, his consulting firm, Townsend-Greenspan, built up an impressive roster of clients among U.S. blue-chip companies. On the side, Greenspan wrote articles on economic issues, which added to the attention he was getting from political circles. Greenspan ended up serving in various capacities under Presidents Nixon and Ford, but it was President Reagan who, in 1987, gave him the role of a lifetime-chairman of the Federal Reserve Board.

From crashes to bubbles

Greenspan's belief in the tendency of markets to self-correct was tested early in his tenure by the October 1987 stock market crash, the biggest one-day loss in...

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