In light of the credit crisis, many blame former US Federal reserve chairman Alan Greenspan for the current malaise in the world economy. However, the man himself chooses to describe it as a once in century type event. Caught in the debate is this memoir of his which went into print barely months after credit bubble burst.
Greenspan unquestionably played a key role in how the US economy as well as the world economy has panned out for over the last five decades. Bearing that in mind this book deserves respect and it does not disappoint. It is engaging and interesting. The author clearly acknowledges that he conveys his understanding of the world in context of his own experiences.
Essentially, the book dwells on Greenspan's illustrious career in the first half and his thoughts on the economy and monetary policy in the second. A trawl through Greenspan's career is highly readable containing bits about how he found his way into central banking and dealt with not just a succession of US presidents from Ford to Bush, but incoming and outgoing administrations as well. It is packed with anecdotes about anything in government circles from Greenspan meeting Margaret Thatcher to conversing with Rush Limbaugh about the Mexican crisis.
From there on to the latter stages of the book, one gradually gets an insight into the former Fed Chairman's thoughts, the influence of Adam Smith on him and his vivid description of the "failure of Keynesian economic models." For those claiming Greenspan had a preference for keeping rates artificially low, there's plenty on ammunition as he admits his liking for "cutting interest rates to make it easier for people to borrow and spend." However, in his defence, Greenspan explains how he kept the recession short via low interest rates following the dotcom bubble and kept them low until he saw an economic recovery.
His problem was that by the time the Fed raised the rates it was already too late and seeds of the current economic malaise had been sown. There is a bit of bravado in his writing which does unravel during current market conditions. For instance, he notes: "Many economists credit central bank monetary policy as the key factor in the last decade's reduction in inflation worldwide." With both economists and central bankers equally foxed and staring at deflation, such statements now seem to be a bit over the top.
Clinton and Greenspan both share some of the blame for the current crisis. This emerges in Chapter 7 of the book which is a fascinating read. Throughout the narrative Greenspan endorses repeal of the Glass-Steagall Act by Clinton in 1999 which ensured complete separation of between commercial banks and investment banks and so began the cycle of high risk taking for high returns.
Furthermore, Clinton's policy of beefing up the Community Reinvestment Act (1977) dwelling on relaxation of rules for mortgage lending fanned the subprime market, which hitherto accounted for less than 5% of all borrowing but rose to 30% by the time Greenspan penned the final thoughts for this book.
In summation, the author perhaps wanted this book to be the celebration of his career. Regrettably, it has rather become an insight into what and where monetary policymakers, bankers and those in financial circles tripped-up.
This should not discount Greenspan's work and his life in public service. He was player in what was to unfold and for the readers he provides a vivid account for them to draw their own inferences. I feel it is a decent book. However, it's prudent to mention that I did find myself frequently disagreeing with the great man's take on the World Economy.
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