Focus 580; Greenspan: The Man Behind the Money

Again let me mention here introduce our guest for the first part of the show Justin Martin. He's a former staff writer at Fortune magazine. His work has appeared also in a Newsweek worth Travel and Leisure and ESPN and his book. Alan Greenspan the man behind the money is published by Perseus publishing and as such just out questions of course are welcome 3 3 3 W I L L and toll free 800 1:58 W while Mr. MARTIN. Hello. Good morning. Thank you very very much by the way for being so patient with our changes of schedule here. I'm real pleased that you could talk with us. Oh no problem at all. Here's maybe one way to begin this. Here in Alan Greenspan we have an individual who is. First of all he's he's head of the Federal Reserve which is a body that I think probably most people don't really understand. I would include myself and being a little unsure about what the Fed does and at some point well we'll talk about that. He's an economist which for a lot of people is an impenetrable science.

He is not personally a critically flamboyant individual not someone that you read much about outside of his role as Fed chair. And having said all of that he says people are fascinated with the with the man. That he when you have things like you know rankings of America's most interesting people. He is he's on those lists along with athletes and show business people you know other more prominent politicians. And you really wonder why. Why. What is it about him that that fascinates people so much. Well let's see it. That's a great question I guess I'd say a couple of things. First of all here is a great example where a person is matched with a job that they're able to do very well and it just so happens that being fed chairman requires a cautious impartial judicious economist and a Fed chairman obviously with so many people in

an American vested in the stock market has become a much more important job it's become a very important role so I guess first and foremost as I say in a society in which people are often mismatched with whether it be in government or politic politics or business or what have you here you've got someone who's perfectly matched do their job. I guess the second thing that makes Greenspan particularly compelling or interesting to people is his job a little The requires him to be discreet and to sort of provide double speak and circumlocution and so he is very mysterious in the workings of the fed every mysterious and what he says just every so often does he provide a sound bite like the famous irrational exuberance comment of 1906. And people are all over that because it's a clue or a hint. I guess finally people sense and I learn in the course of writing and researching my book that there's more to this man than he does in fact have a fascinating history as a professional jazz musician when he was a young man his time with Iran so people receive the something sort of still waters run deep in this. There's a there's quite a story there.

We'll get into some of those things but I guess as general point it sounds as if you're saying that there is there is much more to him than we see as he plays out his public role on the public stage that is what we see what you see is really not all of who this guy is. Very true in fact I guess I'd say two things First of all I guess the what the Fed in fact does its actual doings and dealings are a very arcane and so it's difficult even for professional economists it's difficult to sort of make sense of that. What makes Greenspan particularly fascinating guests is he actually practices part of what the Fed has to be able to do is surprise the markets the markets are always trying to anticipate which direction interest rates are going. If the markets were able to completely anticipate what was going to happen it might actually be a pretty difficult situation in which the Fed was no longer no longer could use its tools to to surprise. And so it's important Greenspan speaks in public that he actually double talk and he actually practices this in his practice that for many years I

talked to several people that work with him at the Fed who said he'll actually sit down for he appears before Congress and figure out ways to make something that would normally be two or three sentences. Draw it out over many sentences so that he can kind of keep that veil of secrecy in place. He was born in New York during the Depression and one would have to imagine that if anything it would be a powerful force in shaping one's thinking about the economy and economics. Having experienced the Depression and would be and he certainly was not not somebody who was born into great wealth. How did he is he is bringing his childhood. You think shaped him. Well most certainly the Depression which was a defining event particularly because historians in retrospect of the term and that one of the major mistakes made that created the onset of the Great Depression was actually poor policy by the Federal Reserve the Federal Reserve actually tightened the money supply at a time it should've loosen the money supply. And so Greenspan I guess you could say

first and foremost when he became Fed chairman he was well aware that some of the childhood poverty he experienced was the direct result of the institution he was now heading up so as Fed chairman he had his first big test in 1907 when the market crashed. He did exactly the opposite. Loosened up the money supply. Following that crash did exactly the opposite from what the Fed did in 1909 that really caused the Depression to be deeper and more intractable than it otherwise would have been. So I'd say that's sort of the first thing the second thing about his youth and upbringing that's intriguing to me is you know his father although he abandoned the family was a professional economist and so that certainly left Greenspan you know in his childhood with with a gift for Freakonomics and his the family he grew up with after his father abandoned the family was a very musical family. And that also left Greenspan with some certain gifts and Greenspan became a talented musician and he as an adult as a as as Fed Chairman Issa has shown a great ability to improvise. You know I think that it's interesting that given the circumstances of

his childhood went on to become an economist because in some part because his father was you would imagine that. Some people in circumstances like that would decide that the last thing that they would want to be was an economist. It's very interesting I mean the way that I look at it kind of it's almost as if you made maybe this is evidence that genetics play a major role or something because his father abandoned the family his father was a professional economist abandoned the family when Greenspan was five years old and really played very little part in Greenspan's life from that point onward. And Greenspan was raised in a very musical family his own father is his grandfather rather was a count toward the synagogue in the Bronx. His cousin Clara went on to sing in the original Broadway production of and he gets your gun alongside Ethel Mermen sea group in this very musical family and Greenspan himself took up the clarinet became a very practiced and accomplished musician. And yet it seems to me he also had great math skills as a as a young boy he was able to actually add a three digit numbers in his head and his mother would

try to mount in front of a guest it's an odd thing here is this musical family and yet this this child has these math skills which are probably the maybe the genetic bequest of his father so Greenspan found himself drawn to math and economics even though he was raised in the very musical family. Well that's interesting I guess that also there are some people who would be prepared to make the argument that music is in fact a very mathematical art and that. It's not all that unusual that those two things would would come together in a person. That's that's a very good point in fact Greenspan himself has said that he's a big fan of the composer Haydn and he said that listening to a Haydn composition to him is very similar to working out complicated economic or math problems he likes to watch that the notes as they are sort of travel towards a satisfying conclusion the same way when one looks at the data series they want to add up neatly to some kind of conclusion. The other sort of interesting part of this is his and his interest in music. The fact that he did actually play professionally he was in a jazz orchestra that toured all over the eastern part of the United

States and he made some money not a great deal of money although I don't know if he made something like 60 bucks a week at that time right. Maybe that wasn't so bad. We're doing something that you really wanted to to do. He did he at some point think about really making over the long term making his living that way. You better believe he did in fact when he was when he was in high school he was just you know wrapped in music I mean he played in the high school orchestra he played in A and an amateur swing band or sort of semi amateur swing band. Toward around the neighborhood where he was growing up and played at temples and churches and Saturday nights for $2 per band member per performance. And as and as a young man he also took music lessons alongside of Stan Getz who of course went on to be a great jazz musician and among other pieces composed the Girl from Ipanema and Greenspan in fact as a young man when he was hanging out with Stan Getz and playing as orchestra. I always said he wanted to be the next Benny Goodman That was his ambition. Benny Goodman was a huge star at that point you know the equivalent of Elvis or the Beatles later and

Greenspan really emulated or wanted to be able to emulate Benny Goodman and so when Greenspan went out and joined this jazz bad he really wanted to be a he wanted to be a professional musician he wanted to make a career out of this. But in the course of playing in the band all the Greenspan was a consummate professional he's also forced to stack himself up against people who were far far more talented than he was. If Sal Cowan and Greenspan ultimately saw that music might not be the right route to take he did so then how was it that he made the decision to go on to graduate school and to take that. What's very interesting he literally when he was in the band he was in the in the he was in the saxophone section and so he was called upon the sort of you know make the little beeping noises in the background while someone like Al Capone might be called upon or Jonny Mandela was also in the band. Jonny Mandela who later composed the shadow of your smile and the theme from MASH these very talented musicians the band that Greenspan played in was called Henry Jerome and his orchestra and they were sort of a second rate. They were certainly no Benny Goodman They were not Artie Shaw they were not Tommy Dorsey. They're kind of a second

rate act that they toured around they certainly got gigs and they recorded albums. But you know not enough that nothing it was a major hit. But even within this band there were some very very talented musicians who would later go on to really make a name for themselves such as Al Capone and Johnny Mandel. And Greenspan really was forced to stack himself up against these guys while playing in the sax section realize he just didn't have it in the meantime. He was really getting drawn to the topic of economics and during the band set breaks he would actually they'd have half an hour set breaks in between you know half an hour performances and he would spend that time reading economics textbooks he found the topic gripped him he found he had an aptitude for it. And so he decided to drop out of the band in the role of NYU. And what one other sort of little irony. Given who he is now. He had to drop out of graduate school because he was having a hard time making that coming up with the money to pay the tuition. That is correct yes. While he was in graduate school he also got married briefly back in the 150 years of marriage for 10 months or so with with a new wife and

with the cost of graduate school grants fanless felt at that point. It just didn't look like the right route to be taking He's also always I should point out been kind of been a pragmatist and he sort of has just just if he was really itching to get out of playing the jazz band he was really itching to get out and sort of practice as an economist and so the idea of being in grad school for many years pursuing a Ph.D. began to look less and less attractive once he had a new wife and the prospect of a long term in grad school. I should introduce Again our guest for this part of focus 580 Justin Martin his former staff writer at Fortune magazine and he is the author of a newly published biography of Alan Greenspan head of the Federal Reserve the tie. The book is Greenspan the man behind the money published by Perseus Books if you're interested in looking at it and of course questions are welcome. The number here in Champaign Urbana if you'd like to call in 3 3 3 9 4 5 5. Also we have toll free line that would go anywhere you can hear us that's 800 to 2 2 9 4 5 5 and if you match the numbers

with letters on the phone you get w i l l so 3 3 3 w. I allowed toll free 800 1:58 W while we do have a couple callers here that want to go to these folks and see what questions they'd like to ask. We'll start out with color in champagne and this will be line number one. Yeah actually this doesn't have anything to do with Alan Greenspan. Stan Getz didn't compose the Girl from Ipanema sorry I'm a big fan of Stan but I want to give him credit for that. It was internal currency OPM fair enough good point I appreciate the correction I guess Stan Getz recorded a Yes record of the most famous version of it. But why he went with the bid right. So he didn't write a whole lot I think he mostly did it that other people see arranged other people stuff that I don't like. Thanks for persisting and thanks. Well you got to be careful what you say I guess. Some always somebody out there whom you know who's going to be a fact checker. OK well let's go to Freeport then Lie Number four fellow who is the person who was our Federal Reserve chairman before Greenspan.

Before Greenspan it was a person named Paul Volcker and he was a two term Fed chairman just as Greenspan is now a four term Fed chairman and was confused. Well I count managers that since the Reagan administration at least I believe before that the Federal Reserve chairman which is a key economic position sort of an economic star for the U.S. economy they've been Jews and owner and. And I'd like to know why that is. It shows our guest It shows the power of the Jews over the US economy or way way way way way just I just want to make sure where you're coming from. Are you suggesting that somehow Jews dominate the American economy. You sure do. Man you are really a warped individual I'm sorry. I think we're maybe done with that guy. I don't know you want to make some kind of response to that Mr. Maher and all of the I mean it's not worth responding except I'll respond in just the simplest manner by saying that if you look at the one of the most esteemed Fed chairman ever that would be Mariner Eccles a Mormon you could then look at on other various scene when

William Chesney Martin was not Jewish so it's kind of it's it was an irrelevant question but just to give people little historical perspective there have been I think 13 Fed chairman and they've been a mix of ethnicity and background. Now let's How long has Mr. Greenspan been head of the Fed. He's been head of the Fed now for 13 years. And how is that longer than any other individual held that interestingly enough not actually just the Martin who I just mentioned was a I from if I recall right he served for 19 years in total and he served through five different presidencies starting with Truman and all the way up through Nixon so he had the longest tenure at that point. And when it does know his term when would he come up for being reappointed. Well interesting the field come up for requirement in January of 2003 which guarantees that our next president whoever it might be looks like it may well be Bush but whoever it will be will get a chance to re nominate Greenspan or picking a new Fed chairman.

Well I know back during the primaries John McCain for example said that. If he was the nominee if he was elected president he would he would ask Mr. Greenspan to continue. It seems likely that anybody whoever the next president would be would be very likely to ask Mr. Greenspan to continue. What sort of thinking is there about whether or not he would want to do that would you know whether he'd want to continue to be chairman of the Fed. Well the thinking is that he obviously is very low so the job is very good at it and I spoke to his wife Andrea Mitchell for the book she told me that even here in his fourth term as Fed chairman when you know in a fourth term for many other political figures in Washington they almost be lame ducks Greenspan continues to get up at 5:30 or 6:00 every single morning including Saturdays and Sundays and get right down the work. He takes his role very seriously also has a real passion for Economics and and Fed policy so it looks and I guess the other thing that should be pointed out with Greenspan is unlike some people of the age of

74 two things one he's in very good health very good health continues to play tennis almost daily and eats very well. I'm and two I'm like a lot of 74 year old he doesn't have any children or grandchildren. And so I think that there's not so much else to occupy his time he loves the job and so if he's it's likely that if the president wants to reappoint him he'd be likely to to agree to that. We have several other people here in line to talk let's do that we'll start in with champagne. Line number one. Hello. Hi question about Grant French connection to Iran and I was interested in hearing more about his relationship to Iran and America interested in Meran why people don't make more of that I guess negative thinking that his her indiscretion to her and I was just interested in hearing what every great question well Greenspan people may not know this but he had a very very close association with Iran and he

sort of joined it was a group called the collective was the name that they that they kind of gave themselves and they would meet on Saturday nights at Iran's apartment in New York City and talk deep into the night about politics and philosophy and music and economics and Greenspan joined this group in 1053 and he was a regular participant at the Saturday night sessions. All the way up to one hundred sixty eight and very close with fine Randy helped her do research for her magnum opus Atlas Shrugged help her do research on the railroad industry which was figured large in that book when Atlas Shrugged received a scathing review from The New York Times. Greenspan wrote an angry letter that was published in The New York Times in the fall of 957 Greenspan wrote essays supporting Iran's particular views about class a fair economics. He wrote essays for her newsletters. One of her newsletters called the Objectivist. He played on the Objectivist softball team that Iran and Iran's followers formed a couple softball teams that played against one another called the witch doctors than the Huns. Greenspan played first base for

the witch doctors. He was just on and on and on basically he gave a lecture called. What was it called if it was a lecture on a free economy or on on less a fair economics that he delivered at various Iran sponsored events. So he's very very involved in them so that's where the first answer or the the answer to the first part of your question. Then it's very intriguing that people have basically kind of disassociated himself him in a way from Iran. I'd say that for two reasons One reason is because Greenspan himself has always been very very good at deflecting his critics and when people question he's never really you know he's never. Got his hackles up or had a you know a defensive response he simply said that Iran helped him to really see a moral component of capitalism that he's always appreciate So first of all for the neutral and you know and defensive response he's had to critics has kept people from looking more closely at the second thing is Greenspan is a master at the flip flop here's a man who when he was in

Iran's inner circle wrote essays criticizing the meddling of the Federal Reserve and now he's chairman of the Federal Reserve where throughout his career as a former musician who became an economist. Here's a person who in his first exposed to economics was interested in Keynesian economics some which is sort of the the more liberal strain of economics that Franklin Roosevelt took up in the depths of the Great Depression and then he did a flip flop during grad school to become more of a conservative economist with a person capable of great flip flops and so I think another issue is Is Greenspan the Federal Reserve chairman is a fundamentally different person than Greenspan is a member of Iran's inner circle and I think that people rightly recognize that and think not so much it was a youthful indiscretion but it was just another stage in a long and very career. Thank you. What from what little I know about Rand and her thinking I think it's fair to say that her philosophy was was extremely conservative for one thing and that it it it elevates individual as an

individual. The effort with this sort of concentration on the the heroic person who strikes out on his own going up against traditions and conventional wisdom and that achieves achievement is all about these these few heroic pathbreaking Rule-Breaking kind of individuals is it. Can you see any of that reflected in Greenspan's economic philosophy or his his policy or or anything anywhere where you see hints of that or or shadows of that in his in his. Real day to day activities. As Fed chair. I would say in in one major way and I was when I spoke with his wife and she said to me that he feels it's a miss responsibility for the role that he plays and with how seriously he takes his job. I was struck by the Randian notion that those who are

blessed with great talents must in turn take great responsibility and I felt like I perhaps at least in one way that was a reflection the fact that it fed chairman he recognizes that he has a complicated arcane job that many people wouldn't be well-suited for. And it plays a major role in the in the health of the economy and he takes it very seriously. I was I was struck by that having kind of Randian echo but then I should also point out contrary to all of this I mean it's important to make this distinction as well. At the same time the Federal Reserve is a is an institution of government that meddled in the economy which was something that I and Rand in her inner circle were very critical of and in fact as the pointed out earlier Greenspan actually wrote an essay published in 1900 in a nine hundred sixty six issue of Iran's Nuclear the Objectivists in which he took his future employer the Federal Reserve to task for lack of independence. So while there may be some some strains or echoes of Randian beliefs in the way he comports himself he's also heading up. Institution which Rand her followers never have an

easy time with. Other callers let's go next to another champagne person this is line number two. Hello. To kind of help me understand the working of the Fed chairman and with what you were talking about with the Iran in the independence of the Fed who does he actually have to answer to. I know he's a political appointee but he has a very long appointment and once he is appointed what kind of what kind of political pressures are there on him from from either side I'll hang up and listen to your answer. Thank you. OK thank you great question. I'll say first of all that there is intense pressure on the Fed chairman. From the executive branch the president of the United States would it any given time love to see interest rates fall any president at any moment no matter where interest rates are would love to see them lower Prickley come re-election time it's the dream of any president that interest rates might be down around 2 percent the interest rates the Fed sets might be down around 2 percent come election time because

there'd be all kinds of new mortgage generation and there would be oh the economy would boom and maybe later it would be a disaster but at least the president be re-elected so this is constant tension that the executive exerts on the Fed chairman they may in a case in bad cases or dysfunctional cases such as George Bush Sr. and Greenspan who really had the poorest relationship of any Fed chairman and president in probably in history George Bush Sr. would periodic Lee during State of the union say interest rates must be lower now which was it obvious. You know sort of direct attack on the Fed's policy. Also the Treasury secretary and the Fed chairman have a tradition of having a weekly breakfast and at that breakfast as a lot of communication and information exchange and that's a prime opportunity when the treasury secretary sits down with the Fed chairman for the treasury secretary to say hey listen we feel we feel we being the administration that interest rate policy is out of whack um interest rates should be lower than I think so a whole lot of pressure from the president from the executive towards the Fed chairman that almost any given point to lower interest

rates the Fed chairman is called upon to look at the data weigh the data and make decisions that are more impartial than that. But one way of looking at might almost be it's almost like the Supreme Court in a way where a Fed chairman is nominated by a president and then has to follow different dictates or mandates or to do the job effectively supposedly you know the mandates in this case of the Fed in the case of the Supreme Court justice of the Supreme Court versus trying to curry the favor of the person who put them there in the first place. Of course being Court justices are appointed for life not appointed for life but for a curious period of time. But if if for example. The the term of the Fed chair. If he did something that that enraged the president enraged the Congress enraged the country. It was there anything anybody could do about it is is that individual safe for his term. They're safe for their term provided they don't engage in the kind of criminal malfeasance. And with that in mind it's a very interesting question you raise

because up until Greenspan Fed chairman have never been in such high profile roles that it would be very interesting I mean static from a statutory standpoint the only way that Sherman could be removed as if they did some kind of criminal mischief dealing but we've also never had a point in history in which you know maybe the economy slides into shambles. And now with the Fed chair a much higher visibility role be interesting to see what Congress and the president did if if you know sort of all eyes were turned on the Fed chairman. Yeah. Let's go to Champagne County next lie number three they don't have an iron number of points but the last change for me the fact that you didn't even mention the Humphrey-Hawkins. Sort of interviews with the with the congressman in point of the car. They become not so much a way of talking to the Congress or getting any pressure from the Congress getting advice from the Congress. It's basically Periodic Time for the Fed chairman to deliver a message to the markets or Israel constituency. And what you have to be a be a Fed chairman is to worship fortune basically

money capital and that's why William Greider book on this called Secrets of the temple. But there's another book Martin Meyers book that has produced this at the end. The cover letter that Greenspan wrote giving his blessing to the the biggest single Savings and Loan takeover for getting the names right now is about it was cheating savings and loans called Lincoln Savings and the book is called the greatest bank robbery ever and stuff that's in Ellen includes the section on. Greenspan's role when he was out of public life he was in charge of an accounting firm basically and they gave him a great no structural problems here to the Keating thing which then collapsed and was the biggest single. He also I think Meyer when he was on this call in show actually pointed out that Greenspan also when he was in the forest being point Fred said was in charge of the mutual funds that got absorbed which is the same thing as going bankrupt basically. So you're

calling him judicious and careful economist is belied by some of the facts that are now that aren't very much mentioned in the latest Vanity Fair which I don't suggest people buy because there are too many bloody ads in it. But there's an article by Christopher Hitchens about include some of the stuff about the economic acumen of Alan Greenspan at least when he was in private life. Seems to me and I don't have time to develop this role there are other people that have written books about the Fed I think that maybe a writer would be a good one to have back I think the other one by The Washington Post WOODWARD It's pretty much of a pain to his acumen as well. But the the sophistication has on him. It's pretty good to have some stuff about the personalities in the rand. Thank Heaven and Rander I guess you might say that he's the best person to beat in the SEC. You can sort of see what he can to contradict the governmental system and I think that's probably the

calculations he's made the calculation he may have made a Cincy. He's pretty much charged with losing seeing Bush Sr's presidency or by consciously raising the interest rate he's sort of done the same in the end of this four year term as well. As you noticed I disagree with you on premise and fundamentals but I don't have much more time to go in a colloquy with you so I'll just let that hang out in the air. All right well let's do it too. The caller makes a number of points you can respond to any. Them that you like should be happy too it's simple enough to respond to it. First of all on the issue of criticism of Greenspan is there any anybody who reads my book will see this plenty of criticism where criticism is due the I certainly mentioned the more or less discussed the letter written about the Savings and Loan debacle and the mistakes Greenspan made there Hitchens article in Vanity Fair actually is. It's based on my book because he didn't have the color didn't bother to mention that but the bottom line is it's very simple to delineate on Greenspan's made plenty of mistakes.

And those are certainly recounted in my book in fairly great detail but I think people have a hard time arguing that Greenspan hasn't also had a well once you've actually been impressed. Yes as a private economist he made some mistakes including I'm writing a letter in support of a savings and loan that failed. But in the real prime time in the spotlight the Fed chairman he's he's overseen and been a partial architect to help with with the longest boom in U.S. economic history I think that would be hard to take away from him so I guess the bottom line is he made some mistakes and I recounted in my book and other good books as well. But then his term as Fed chairman has been pretty pretty impressive hard to argue with. Certainly some mistakes there to which I get into but. That's that's the bottom line. We are a little bit past here. Our midpoint and I think probably I should introduce Again our guest and we'll get right back to the phones because we have a number of callers We're talking this morning with Justin Martin he's a former staff writer at Fortune magazine. His work has appeared in other publications too including Newsweek and worth and he's the author of a newly published

biography of Alan Greenspan the head of the Federal Reserve the title of his book is Greenspan the man behind the money published by Perseus. So if you're interested you can head out to the store and take a look at it and the questions are welcome we'll try to get as many as we can. 3 3 3 9 4 5 5 here in Champaign Urbana toll free 800 to 2 2 9 4 5 5. We'll go next to have somebody here on a cell phone line number for Hello. Hi yes I'd like to I guess join the chorus of people out here in the Midwest to question green band throw you a lot of information. Very very interesting and I'm enjoying this. But I'd like to question the amount of credit he gets for the economy of the last eight years. Republicans would like to give him the bulk of the. Read it and ignore the Clinton economic plan that was implemented in 93. But if you look at specifically when you get beyond Greenspan's famous

U.K. ssion and look specifically at some of the predictions he made when the unemployment rate was creeping down toward 6 percent he started ratcheting up interest rates saying that unemployment below 6 percent would be inflationary. We've now had about four years of unemployment between 3 and 4 percent. And if you look at the specific prediction he made which was sort of an article of faith among mainstream economists he was simply wrong. And what he did was I think take a lot of money out of the pockets of working people by job building down wages unnecessarily. Seems to me like. In retrospect economic historians will say that these were were great years. But there are people who say that the economy sort of goes in cycles. And I don't want efforts would have corrected the economy of the 70s. I mean it was just sort of doom to the head and to what happened in the 80s and

likewise in retrospect. So there is a constellation of a whole bunch of factors came together to make the 90s a good time. And Greenspan and no one else deserves any particular credit. These things just happen. Well it's. Question again let's let's go to our guest and Mr. Martin what do you think. I think it is an excellent question an excellent point I would say that the caller certainly right when he says a constellation of factors played a role here. Everything from the fall of the Berlin Wall which led to a situation which United States could expend a lot more effort on the economy versus national defense the technological revolution the Internet which the great engines of wealth creation naphtha which was something that was dreamed up by George Bush and shepherded through by George by by Bill Clinton on and on and on just any number of different factors that could have led to this. But I also think that it's important to give Crean's band credit where credit is due and where he deserves credit is for being very flexible as as new rules

started two hours of the old rules have been broken he's been quick to make adjustments to make changes the caller made reference to the fact that the unemployment rate began to fall beneath a level at which it traditionally which traditionally would signal that the economy was tightening of the economy might overheat. And Greenspan has taken that data and sort of broken the old models of OK unemployment could be much lower than we previously thought because we have a more productive economy. So he's been very flexible and it's been very well worth pointing out that you have several events the crash of 1987. A period in the early 1990s when Clinton just came into office when the economy was sluggish and the so-called Asian contagion 1098 any of these times could have been real forks in the road the crash of 87 had Greenspan and the Fed not respond properly we could have had a deep recession in the early 1990s when the economy was sluggish had the Fed not done really savvy interest rate policy. The economy may have continued to be sluggish in 1988 when the Asian contagion began to threaten our shores. When our

problems in Korea and Russia look like they might spill over the United States had Greenspan not been very very savvy calibration of interest rates at the right time in the right way and backed it up in public pronouncements with words we might have again had an economic dislocation perhaps a recession so I think that the caller's absolutely right saying there are a whole confluence of factors and certainly Greenspan's been the beneficiary of some some great historical movements and and business cycle fluctuations that don't have anything to do with him but he's certainly bolstered this economic expansion in every way he can with savvy monetary policy at some critical juncture so I really appreciate the question of the call or hope you'll forgive me for wanting to go on we have just about 10 minutes. And three other callers are well try to get into all the people that we can. Going next to a caller here on the line number one or two and that he is solo. Oh yes. Number two is in your banner. Yes. Great show. Very interesting. Even for those of us who are not economists

I do have a slight question no and that is. Mr. Greenspan has come late and I don't even know what to call them they are so much in the background I think Commissioner I have a committee member. How does one even refer to them. Great question Well he's he's surrounded by 11 other governors. That's the term for them and the giant giant retinue of economists the Fed employs so many professional economists that think it's more than almost any other institution in the world with more than more than Harvard University or Stanford. So he's got the governors who he's working with directly sort of out of the word. And then a number of economists supporting on the research efforts of the Fed and policy directives. Thank you. I do long runs I think you for the call. Then I guess let me bring by Jeb age back up here again next caller. I think this is also Urbana line one. Oh yeah long time ago I read a couple of articles or tried to read a couple of articles that he wrote for a book called capitalism which

Honorine Yes apparently edited. And it really I could I don't think I could get through him because that just curled my hair is such a lot of a fairy you know gung ho all the overclass. Let's let's form a pirate pirate ship and go out and conquer kind of a point of view. I would like to like the caller before last my big thing with Greenspan is that is exactly what he brought up whenever he claims to be talking about a heated up account I mean what he's really talking about is that wages and salaries go up and you know he's got this kind of. He's always going toward the the the the always trying to benefit the wealthy at the expense of working people and I was just wondering if you think he means he if you're really confronted on that one issue which he's never been as far as I can tell. If you

think he might have a you know some sort of cogent response to that or what he would he just. What do you say opposite. Various confuse confronted on the issue of whether he really ultimately supports the the interests of the wealthy isn't the question over overhead. The expense of what I would assume he considers the underclass or be over class over underclass sure. Well good question I'll say first of all I think if he was confronted directly with that question I think we have if this were if history is any guide I think he would be likely to obfuscate. I think you'd give a long and circular answer but not to speak for him but I'll attempt to you know at least answer the broader question. That's what his policies in fact support and I would really come down the side of no they're not actually the the Federals are people rightly point out that the Federal Reserve worries about unemployment getting too low and what a perverse thing that seems to be I mean why should unemployment just go down to zero

that would be wonderful that would be perfect. But in fact the one thing that's very interesting about. The capitalist economy that we have is that it's set up as such where there has to be some fluidity it has to be possible for people to migrate from jobs that they're not well suited to jobs where they're better suited there has to be a lot more flexibility as there is in them in the state controlled economy such as the Soviet Union had for many years and in such an economy you've got to have part of that dynamism dynamism of a high tech economy particularly you've got to have some level of unemployment to have people moving around moving from job to job finding a job where they fit. The other thing is if you have really really low unemployment this is incontrovertible what starts stepping on nobody knows what the exact level is and that's where Branson is very flexible is it 6 percent of the 4 percent is a 3 percent unemployment but one thinks incontrovertibly Is that what has starts to happen is when you have very low unemployment. Employers become desperate for employees whether they in turn start doing is bidding up the price for employees when they bid up those prices and pay employees higher salaries. They even have to raise the

price on the goods and services that leads to inflation. Consumers wind up buying less goods and services that cause the businesses to slow down and wait a minute. All the sudden this very low unemployment has led to a bad situation we're actually sliding into recession and that low unemployment leads to much higher employment higher unemployment and so ultimately the Fed is trying to seek a balance of so many things in the world are an aim to achieve a balance the Fed's actually trying to achieve a balance by trying to keep unemployment. Sustainable not too not too high obviously not too low if it's allowed to go too low it will bounce back openly come to. I think that's something people often don't understand about the workings of the Fed. Oh I understand it perfectly but you just you just made my point because what you were saying essentially is that the workers got to take a hit once in a while but the capitalists are allowed to always increase their prices to cover their profits. That that was and I think that's essentially what you said I think it's ludicrous. Thank you sir. I will get one more call here in champagne's line number three.

Yes continuing from the last point. So we have a theory called the non inflation non accelerating inflationary rate of unemployment which says that if unemployment goes below a certain level that there's a theory ok and supposedly we need to plug a number into that theory. It used to be 6 percent now it's 4 percent maybe it's 2 percent. It's kind of like if I say if my kid went to school and they told him Well today pi is three point one for but tomorrow it's going to be four and the next day after that it might be two point three. This theory is ludicrous OK Robert Eisenman a very good book called The Real Economy points points out I think argues very well he was former president of the American Economic Association. And unfortunately died several years ago. But in this book the real economy it makes he makes asked. What mincemeat of this theory. This is simply a theory used by capitalists and by the privileged to dictate that the unemployment rate should not go beyond the lower certain points so that the poor so

that people survey just wages will not be lifted. It is simply assumed that it is more important for stock owners and very wealthy people to make profits than it is for people at the lowest levels of the economy to get a raise in wages. This business of people moving from chop chop to job I don't know where you got that that has nothing to to do with anything people will do that whatever the labor market is especially if wages are going or going up. So that has nothing to do with it. And in in we guard to the previous unfortunate comments about Jews which were totally inappropriate and you say you say the Fed chairman comes from diverse backgrounds I have my question. Have any of them not been a white male. Have any of them not been privileged. Have any of them had viewpoints that disagreed with corporate leaders. Banking leaders in this country. Sure I'll take but the first point being has a Fed chairman we yet have a Fed chairman that some other than a white male I'll say unfortunately no we have we have not however the vice

chairman of the Federal Reserve right now the possible heir apparent of a man named Roger Ferguson who is an African-American. There's been very high ranking and continue to be high ranking females on the board of the Federal Reserve. And just as an force we haven't had a president or many other roles in the United States I'm occupied to this point by someone other than a white male I mean it seems like those doors are getting knocked out you know on what basis did you state to federal chairmen have come from got diverse backgrounds at that point to simply diverse from a standpoint they had not just been Jews they've been Mormons and other but they haven't been diverse in all kinds of. We have all we've had all kinds of privilege white males wearing blue suits in this shop. So so far it's been occupied by. But yes it has been occupied by white males of somewhat diverse backgrounds and you know that the Fed is responded to challenges about diversity by as I said the the second command said right now is an African-American man named Roger Ferguson and there Friday of others I could not possibly even hope for or try to defend the lack of diversity at the federally other institution but I would say that there are strides being made

were I don't know where. Fortunately for us where at the time they were pretty much going to have to stop I don't know if there was any last thought that you are at last point that you wanted to make before we end up having to wrap up. I'm all I guess the only last point I'd want to make is several callers in a row sort of raised the point that they sort of muddy the waters to a degree by talking about the noninflationary series of unemployment which actually three first proposed by Milton Friedman so it's hardly Greenspan's theory. And Greenspan I think lost in all the screens that's been extremely flexible He hasn't scribed in any way this particular theory. It was the theory held that if unemployment fell below 6 percent you would have inflation and Greenspan has been very comfortable watching unemployment falls below 6 below 5 below 4 and the open thing is that the Fed actually read the tealeaves looks at the economy and looks for signs of a slowing economy signs of inflation creeping up and if it doesn't see those it's certainly not going to mean if unemployment can get. But if this wave of unemployment can get down to zero without causing

instability and imbalances in the economy which it almost certainly would but if that could happen the Fed wouldn't touch things. So the notion that Greenspan is somehow I am an advocate of unemployment is shows a I guess on the part of several callers their leashes. Yes as am I confusion about the Fed's role. We're going to have to stop with the promise that perhaps on the day we get back to some of these issues but for the moment we want to say. Mr. Martin thank you very much. Thank you it's my pleasure. And thanks for being so flexible with us this morning. Sure happy to be. Thank you very much our guest Justin Martin former staff writer at Fortune magazine if you'd like to read the book it's titled Greenspan the man behind the money or the man behind money Perseus publishing is the publisher.