As the Greenspan era comes to a close, I am going to miss the new phrases that would enter our vocabulary from time to time such as “frothy”, “irrational exuberance”, “conundrum”, “speculative excesses, “Greenspan-speak” and others. Most of all I am going to miss the confidence the markets placed in his policies. Replacing him is a tough act to follow although [the financial markets appear relatively happy [Marketwatch]](http://www.marketwatch.com/news/print_story.asp?print=1&guid={0E783473-20C4-43FC-B423-85EE7A6403C2}&siteid=mktw) with the choice as the [Dow and S&P had their biggest increase in 6 months after the announcement [Marketwatch].](http://www.marketwatch.com/news/newsfinder/pulseone.asp?siteid=mktw&dateid=38649.6715281366-847329361&)
Yesterday [President Bush nominated Ben S. Bernanke, a former Federal Reserve Board member and Princeton professor who currently chair’s the President’s Council of Economic Advisors to be the next Chairman of the Federal reserve [NYT]](http://www.nytimes.com/aponline/business/AP-Bush-Fed-Text.html?pagewanted=print). He is considered a “first, among equals” to his peers [but his political views are largely unknown [NYT].](http://nytimes.com/2005/10/25/business/25profile.html?ei=5094&en=85c199b3d7b04f60&hp=&ex=1130299200&partner=homepage&pagewanted=print) He actually [penned a story in 2000 on the topic of replacing Greenspan [WSJ].](http://online.wsj.com/article_print/SB947027252754116777.html)
On a lighter note, there is some hope to fill the vocabulary void that I so enjoyed with Greenspan. He appears to have a sense of humor.
>My proposal is that Fed governors should signal their
> commitment to public service by wearing Hawaiian
> shirts and Bermuda shorts has so far gone unheeded.
A few days later, Mr. Bernanke showed up early for another meeting with Mr. Bush and distributed tan socks to the meeting’s other participants. When Mr. Bush arrived, all, including Vice President Dick Cheney, were wearing tan socks. Mr. Bush laughed.”
One of the more notable differences between Greenspan and Bernanke is how they handle inflation. Bernanke subscribes to the [theory of setting a formal “Inflation Target” [WSJ].](http://online.wsj.com/article_print/SB113020394403278392.html) which would demonstrate the Fed’s commitment to low inflation. Opponents of the strategy say that it will limit the central bank’s flexibility.
The WSJ has a series of charts that show the economic success of the Greenspan era.
Growth
Prices
Rates
Stocks
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Perhaps Bernake could be the first to start the Hawaiian shirts/bermuda shorts trends. His confirmation hearings are likely to be well publicized and would make the perfect opportunity!
Yes, like Yogi Berra, Alan Greenspan had a way with words. And while English aficionados may have cringed at times, the rest of us readily understood what Greenspan was trying to tell us. Well at least we told ourselves we understood.
While I’m no Federal Reserve groupie, it seems there was much speculation about some guy named Alan Greenspan taking over for the larger-than-life, Paul Volcker, who served only eight years as the Chairman of the Federal Reserve. I sometimes wonder if the dog and the tail wagging saga haven’t found equilibrium. That is, how much of the Federal Reserve’s effort represents leading, following, or getting out of the way? As I noted in one of my earlier comments (Housing’s Booming Lack of Volatility) (and yes I am quoting myself), ‘Despite the Fed raising rates 11 times, long term mortgages rates remain low, as foreign investors continues to pour piles of money into mortgage backed securities.’ This seems to be a clear example of the Feds leading, but then trying to get out of the way, only to end up following (AKA getting dragged along).
So whether the chairman is Paul Volcker, Alan Greenspan, Ben Bernanke or Ringo Star, the question may have more to do with knowing how to word it, rather than how to do it. And if we are equally lucky over the next 18 years, we will quote Yogi and say, ‘it’s deja vu all over again.’