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] with the choice as the Dow and S&P had their biggest increase in 6 months after the announcement [Marketwatch].
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]. He is considered a “first, among equals” to his peers but his political views are largely unknown [NYT]. He actually penned a story in 2000 on the topic of replacing Greenspan [WSJ].
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.
“Until he joined the Council of Economic Advisers, Mr. Bernanke had little contact with Mr. Bush [WSJ], and indeed in many ways is the antithesis of the power-suited business executives that Mr. Bush has preferred for top economic policy posts. But he appears to have earned Mr. Bush’s trust. Earlier this year, Mr. Bush gently chided Mr. Bernanke for showing up at an Oval Office meeting wearing a dark suit with tan socks, according to several people familiar with the incident.
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]. 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.