Alan Greenspan, in his own words

The man who once made global markets tremble reveals his true thoughts on America's economy.

By Mark Trumbull

from the October 9, 2007 edition

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As a boy in the 1930s, Alan Greenspan found fascination not in bankers but in the telegraph operators who were a staple in Western movies.

He and a friend named Herbie rigged up some key sets and practiced sending messages to each other in Morse code. "At crucial moments in the plot, they could call for help or warn of an impending Indian attack, as long as the lines hadn't been cut," Greenspan writes in his new memoir The Age of Turbulence. "Just knowing the code gave me the thrill of that world."

His book doesn't draw any parallel, but Greenspan would later become famous for speaking coded messages of his own.

As head of the nation's central bank from 1987 to 2006, he used often-obscure language to telegraph signals of comfort or alarm to power brokers in Washington and on Wall Street. His aura grew. Many Americans came to believe that he had cracked the economy's code.

Now we can all read the inside story, as narrated by the man himself. And thankfully, we find his narration free of arcane "Fedspeak."

Indeed, this book is less about the Fed, or even Greenspan himself, than about the economy that he has studied for decades. But those stories are all interwoven in an engaging manner.

"The Age of Turbulence" opens at a moment of crisis, the 9/11 terrorist attacks. In the uncertain days following the tragedy, Greenspan told a Senate panel that patience was in order. He said that advances in information technology, plus flexibility in labor and financial markets, have enhanced the economy's ability to cope with disruptions.

Within himself, Greenspan wasn't so confident. "If I had fully expressed what I thought the probabilities were [of additional terrorist attacks], I'd have scared the markets half to death. I realized I probably wasn't fooling anybody, though: people in the markets would hear me and say, 'I sure hope he's right.' "

Follow-on acts of terror or sabotage didn't come, and the economy did cope with the considerable challenges it already had. "What I'd said so optimistically to the Senate Banking Committee turned out to be true," Greenspan writes.

This adaptive vitality of free markets becomes a theme that echoes throughout the book. Greenspan does recount personal successes, such as overseeing a rare "soft landing" in 1995, in which the Fed raised interest rates without any ensuing recession.

He also offers his account of some actions that have been criticized. He recalls feeling disbelief when Democratic Sen. Kent Conrad (D) of North Dakota and former Treasury Secretary Robert Rubin warned that his planned testimony on fiscal policy early in 2001 would be interpreted as a blanket endorsement of President Bush's proposed tax cuts. "It turned out that Conrad and Rubin were right," Greenspan writes.

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