The Unique Federal Reserve Chairman──The Wisdom of Alan Greenspan

Author: GUDORDI | 2024-01-12

Greenspan was an expert in econometrics and was good at using numbers. (Shutterstock)

The core of capitalism is creative destruction. At the heart of Capitalism is Creative Destruction.
──Joseph Schumpeter

Market economies are driven by what Professor Joseph Schumpeter, a number of decades ago, called “Creative Destruction”. By this he meant newer ways of doing things, newer products, and novel engineering and architectural insights that induce the continuous obsolescence and retirement of factories and equipment and a reshuffling of workers to new and different activities. Market economies in that sense are continuously renewing themselves. Innovation, risk-taking, and competition are the driving forces that propel standards of living progressively higher.
──Alan Greenspan Greenspan)

Greenspan is an expert in econometrics and is good at using numbers. However, the above description of the nature and principles of economic development is more like the words of a philosopher, showing that he can see through the complex and dynamic dynamics behind numbers and mathematical equations. Economic reality──This is an extraordinary achievement.

Strange people of the 21st century

I believe many people agree that Greenspan is a master in grasping the pulse of the economy. He has a deep understanding of economic theory and is even more miraculous in practical operations. During his 20 years as chairman of the U.S. Federal Reserve (1987 to 2006), he helped the U.S. economy avoid danger time and time again, thus terms such as “Maestro” and “Greenspan Put” came into being.

It is a pity that some people blame Greenspan for the 2008 financial crisis, otherwise his status would be higher. The author believes that this comment is not completely fair. Greenspan can be called a strange man in the 21st century. Comparing his speeches and writings with those of previous Federal Reserve chairmen, his style is quite different. Most of the other presidents have a technocratic feel (which is normal, because this is a job), but Greenspan, in addition to being a competent bureaucrat, is also a philosopher, an economic theorist, and even a politician.

Greenspan's advice

As an official, he strives not to infiltrate his personal views into his speeches, but between the lines, some values and views that he believes to be right can still be seen, especially in speeches on unofficial occasions. The author believes that he intended to push the US government to eliminate the fiscal deficit at that time, and Washington did achieve this goal for a time during his tenure. This is in the long-term interest of American society. Although some commentators believe that the Federal Reserve’s power is limited to adjusting monetary policy and should not try to influence government fiscal policy, the author feels that he hopes to use this position to practice his ambitions, verify his understanding of economics and human nature, and do something that others think is impossible. to do something, not just for monetary reward (if he stayed in the business world, his income would be higher).

During his tenure, Greenspan often talked about more abstract topics, such as the philosophy of regulation, the principles of economic operation, the nature of competition, etc. Although the information is very scattered, if we put all the records together, it will be of great help in understanding his thoughts and will also be of educational value. Both he and Buffett make people feel like wise teachers and elders. A careful reading of these records brings at least two pieces of advice to Hong Kong’s career as an international financial center: one is the importance of innovation mentioned at the beginning; The importance of checks and balances on greed.

Contact the author: Gudordi@proton.me