Greenspan's next test
By Gerard Baker Published: August 8 2002
This week, we learned he is to become a Knight (Honorary) of the British Empire, another defunct institution but one that lasted a bit longer than Enron and arguably did more damage to Americans' lives and property.
Joking aside, the knighthood could not have been more timely. According to the citation, Mr Greenspan (not Sir Alan, please) was recognised for his "outstanding contribution to global economic stability".
Few would argue with that assessment. In his 15 years at the Fed, Mr Greenspan has fought and won battles against inflation, recession, and domestic and international financial collapses. But a monetary policymaker's work is never done.
And at this precise moment, just as Her Majesty is readying her arm for the dubbing of the world's greatest central banker, Mr Greenspan is facing one more almighty challenge that could yet tarnish his glittering reputation.
The moment of truth is the stress test that this crisis will place on the confidence of the Fed chairman and many others in the US economic transformation of the late 1990s.
Until about 8.30 last Wednesday morning, it was plausible to argue, as Mr Greenspan did, that the US was on course for a solid recovery from last year's recession.
As if this was not bad enough for Mr Greenspan and the optimists, the data also suggested their longer-term optimism about US economic performance over the past few years - which I have shared - faces a "moment of truth".
GDP revisions have trimmed a bit more off the "productivity miracle" of the late 1990s. But perhaps even more important, the now significantly enhanced risk of a double-dip recession could further dent estimates of long-term trend growth if the investment slump goes on and protracted weak demand depresses business productivity further
Why Greenspan allowed
irrational exuberance
Gerard Baker, Financial Times, March 07 2002