Why does alan greenspan doublespeak

Bernanke does say something, they say, but his task isn't made easier by private-citizen Greenspan's comments on current economic-policy issues.

Even Bernanke's counterpart at the Bank of England, Mervyn King, issued a veiled rebuke of Greenspan at a press briefing this week. Asked if central bankers, including Greenspan, should comment on monetary policy after they leave office, King said, "I'll say only that I am very grateful to Eddie George King's predecessor at the Bank of England that he has not been in the newspapers or on the radio all the time commenting on what the [monetary policy] committee was doing," according to a report by Bloomberg News.

Greenspan is no longer Fed chief. On Thursday, Greenspan told his Atlanta audience that the "surge" in subprime mortgage lending in recent years "is suppressing the whole home-building area. We have got a continued period of weakness in new-home construction. He declined to forecast the consequences of the problem, but said in March that there was a "one-third probability" of a recession this year in the United States.

And his argument is perhaps more pertinent today than ever before. A time where central bankers are trying to balance multiple competing objectives with just one concrete policy instrument: short-term interest rates. Poor Glenn Stevens is trying to juggle inflation, growth, unemployment, the exchange rate and housing prices all at the same time.

He needs more than just the cash rate to do that. And to influence expectations at all he must balance the precision and credibility of his language. What central bankers say communicates a lot more information that the interest rates they set. Festival of Social Science — Aberdeen, Aberdeenshire. But in most cases, the Fed is sailing through a fog. Forecasting the economy's twists and turns is an imperfect art at best and nearly impossible at turning points, such as the onset of a slump or recovery.

The Fed is no better at forecasting than the weather service; the last time it tried to slow the economy down, in , it plunged the country into a recession. That doesn't stop investors from trying to anticipate the Fed's moves. As a result, Greenspan has to watch his words, lest they become a self-fulfilling prophecy. That's why he and other central bankers rarely use the "r" word, lest panicked investors pull their money out of markets and stop investing, triggering a recession.

You have such an effect on the market and such an effect on people's expectations that you try to be very careful in what you say.

During the reign of Fed Chairman Arthur Burns in the early s, Fed watchers would keep a close watch on his eyebrows for clues to what he really thought, Dederick said. Finally, although I have had my differences with my colleague Hilton Kramer, but let it be said that, issue in, issue out, his New Criterion is the most interesting journal going.

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