Poor Mr. Greenspan: can’t open his mouth without giving investors the heebie-jeebies!
He promised he would be quiet, just like his predecessor Mr. Volcker was about monetary policy when he himself took over. Even when he only whispers, people pay a lot, a lot of attention, and go into a frenzy of wanting to sell this or buy that. Hear him protest: “What I do talk about are the global forces that are functioning, how the world is running and how the economy is developing, in a manner that I used to do when I was an economic consultant. The only difference is back then I’d discuss what the Fed was going to do as a consequence of all this. Now, I just don’t do that.”
On September 21st, 2006 Mr. Greenspan said that “it is not yet possible to say whether ‘mortgage equity withdrawal’ is yet affecting consumption” and these simple words sent bond yields into a tailspin.
On February 26th, 2007 Mr. Greenspan said “the probabilities of forecasting a recession are probably more in the area of a third than they are more than a half” and investors rushed into a stock sell-off that sank the DJIA by 3.3%.
So no wonder that when he publishes a research paper (*), still under the auspices of the Fed (a very unusual feat for a former Fed Chairman, as commentators noted), he dutifully abstains from deriving any conclusions, being content with downloading the raw facts onto the innocent bystanders as if saying “Hey, notice: I’m not stating anything!”
My guess is that he wouldn’t mind however that someone else says something about what he’s seen; why would he otherwise provide a neat Excel spreadsheet with all the numbers nicely aligned, invitingly asking to be interpreted?
Who would like to be the mouthpiece of the by now very, very quiet Mr. Greenspan?
Watch this space…
(*) Alan Greenspan and James Kennedy, Sources and Uses of Equity Extracted from Homes, Finance and Economics Discussion Series, Divisions of Research & Statistics and Monetary Affairs, Federal Reserve Board, Washington, D.C., 2007-20