If you want to know how far can extend the hero worship for a central banker, must look back at the turn of the millennium. Alan Greenspan was then head of the American Federal Reserve (short: Fed) – and it seemed as if he had found the magic formula that brought the American economy eternal growth and the global stock markets infinite price increases. Crisis? Recession? In 2000, these words from the collective memory of the financial world seemed deleted.
Greenspan was considered the “magician” as “Almighty” or “most magnificent central banker in history”. Whatever might happen, the Fed Chairman would have the right answer.doubts about so much hero worship harbored few: “Investors rely so much on Greenspan’s magic hand that they bid up the shares in the assumption that he will save even if it goes wrong,” wrote the British business magazine “Economist “In early 2000 – and met so exactly the point.
On Sunday Greenspan is 90 years old. And the myth that once surrounded him, is not much left. Greenspan’s policies have driven the world into the greatest financial crisis since the thirties, say his critics.
With low interest rates and its belief in the self-regulation of the market he had fired the debt boom in the US housing market, which ultimately lead to collapse the financial system led. And now it might depart from even the question of guilt. “He still has not the integrity, to take responsibility for his own actions,” complains Nobel laureate economist Paul Krugman.
How did it come to this?
As Greenspan in August 1987, leadership took over the US Federal Reserve, he had already put in an amazing career. Born in 1926 as the son of German-born stockbroker Herbert Greenspan, he was interested in early for figures. His doctorate at Columbia University, he broke off in 1953, to start a financial consulting firm. . Later he worked for the US Presidents Richard Nixon and Gerald Ford before brought him Ronald Reagan at the head of the Fed
Only two months after taking office, he had to pass its first test: On October 19, , the “Black Monday” stock market prices worldwide slumped by up to 20 percent. Greenspan reassured markets by pumping new money into the financial system – an agent that he would successfully apply from now on again and again.
Hoping for the Greenspan Put
Greenspan made money cheap. Had the so-called base rate even located when he took office was just under 7 percent and the early eighties at 20 percent, the new Fed chairman unscrewed the set 1992 temporarily down up to 3 percent. This made the loans low – and brought the economy going. The companies invested, consumers consumed, and investors put their money in increasingly booming stock market.
On shocks, such as the 1997 Asian crisis, Greenspan responded with new low cost money. Was the crisis is over, he put the interest rates up again slowly. The magician, it seemed, had the situation under control. No one had to worry more.
cult was the thin man with the horn-rimmed glasses also by its complicated and often vernuschelte language. Greenspan’s biographer Bob Woodward reported, the Fed chief did his second wife, the TV reporter Andrea Mitchell, have to make a marriage proposal twice -. The first time she had simply not understood him
The investors understood him very well , And even in 2001, when the dotcom bubble burst in the stock markets and the terrorist attacks of September 11, offset the financial world in panic, it seemed as though Greenspan things somehow regulate. like never before as deep – in several steps he pressed the key interest rate from six to one percent. Lo and behold: Shortly thereafter, the economic growth in the US picked up again, and the end of 2002 to early 2004 shot of the Dow Jones stock index by more than one third upwards.
The magician had done it again. The Greenspan Put, as the Trader called his rescue had worked again. . This strengthened the belief in the omnipotence of central bankers
“Optimistic I no longer am a long time”
However, the thick end came not yet: The low interest rates and the Ownership policies of the US government fired an unhealthy housing boom: Many Americans indebted to the banks in turn package the shaky loans and sold them as securities in the world. From 2004, Greenspan steered although with rising interest rates on the other hand, but by then it was too late. The bubble inflated even further on – and finally burst in 2007. The result was a huge financial crisis.
Greenspan was already no longer on board. He had already passed his office as Fed chairman in early 2006 to Ben Bernanke – and hired himself henceforth as a consultant of large financial companies. In January 2008, he hired just with the hedge fund of John Paulson – that financial manager who earned with betting against the US housing market billions of dollars.
Meanwhile, Greenspan again privateer. With his wife, he lives in New York – and sometimes he logs on to the current financial world affairs to speak. Recently he sounding quite moderate. He had never seen so many uncertainties experienced as at present, he said last week in an interview to the Bloomberg TV. “Optimistic I’m long gone.”
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