To OTC Journal Members:
 

So Long Greenie, It's Been a Great Ride

I couldn't let the week pass without lamenting the retirement of Alan Greenspan as the Chairman of the Federal Reserve Board. After an 18 year run as the single most powerful man in the financial world, Mr. Greenspan has retired to a life of mega fees for speaking engagements. I hope he makes a fortune, and I hope he writes a tell all book. He has earned the right.

His legacy includes piloting our economy and the stock market through the 1987 stock market crash, the collapse of giant hedge fund Long-Term Capital in '98, the bursting of the tech bubble in 2000, and the devastating effects of Hurricane Katrina. When he took office in August of 1987, long term bonds yielded 8.7% and the DOW Jones stood at 2680. Long term bonds now yield about 4.4%, and the DOW stands at 10,800.

His accomplishments are likely to be reviewed and critiqued by historians for years to come. For all the details you can read their stuff. In keeping with my style, I'll just share a couple simple observations.

My entry into the real world came post college in the late 70's. It was the post Viet Nam era. Thanks in part to the policies under the Carter Administration and sky rocketing world wide oil prices, inflation was running rampant. The Fed Chairman Paul Voelker was forced to send interest rates through the roof in order to tame inflation. I remember the Prime Rate challenging 19%. High quality muni bonds were yielding 12%. The money supply was choked to barely a trickle. The inevitable result: a nasty recession.

These sky high interest rates, fueled by sky high oil prices, caused a horrendous fall out in the real estate market. This led to a complete melt down in the Savings and Loan industry. Bank were failing every where you looked.

I don't know if anyone else has noticed, but since Mr. Greenspan took over as the Fed Chair, these wild cycles have smoothed out considerably. Despite two US involved wars in the Middle East, economic collapse in many other nations, globalization, natural disasters, and 911, our economy seems to be purring along, delivering continuous moderate growth and reasonably tame inflation. 

In short, under King Greenie, the wild economic cycles of the past have simply "smoothed out". A magnificent job.

I will really miss Greenie's semi annual Humphrey/Hawkins testimony on capital hill. It was always televised. The majority of congressmen and senators liked and supported Alan Greenspan. But, stick a camera with a nationwide audience in front of a politician, and you inevitably get diarrhea of the mouth. There were always a few who knew the cameras would be on them when they got the opportunity to "grill" the Chairman on his "flawed" policies.

He toyed with them like a cat with a wounded mouse. Brain power wise, they were no match for Mr. Greenspan. I will really miss his understated replies which made the contentious ones look like idiots. More than one excused himself (or herself) from the room to rush off for a surgical extraction of their foot from their mouth.

It was very amusing. They just didn't have the brain power to match wits with Alan Greenspan. I will miss those hearings most of all. 

Thanks for a magnificent career of selfless public service. Alan Greenspan: A true patriot in every sense of the word. 

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