Alan Greenspan, in his own words

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

from the October 9, 2007 edition

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(He defends his proposition that tax cuts were warranted at a time when large budget surpluses were forecast. But he wanted to see tax cuts accompanied by triggers to ensure fiscal discipline.)

And this book dishes out some criticism of other power brokers. Greenspan takes his own Republican Party to task for abandoning fiscal discipline during this decade, as those forecasts of surplus have turned into government deficits.

Yet, in keeping with his libertarian views, he returns frequently to the virtues of free markets.

In the Reagan administration, Greenspan worked for a time analyzing the Soviet economy. He relates that the Reagan arms buildup was a conscious test of two systems, based on the notion that the centrally planned Soviet economy couldn't keep up.

Greenspan doesn't pretend that all debates about capitalism have ended. For example, he says: "One can seek material well-being and yet view competitive markets as subject to excessive manipulation by advertisers and marketers who trivialize life by promoting superficial and ephemeral values." But he says free markets have won hands down over central planning.

Half the book is memoir, and half is a forecaster's look at major issues facing the world economy.

Greenspan enjoys a generally sterling reputation among economists.

Still, this book doesn't deflect all criticisms of the former professional saxophonist who came to be called "the maestro."

Beyond the question of specifics in his testimony on tax cuts or other issues, was Greenspan more prone to making politically charged pronouncements than a Fed chairman should be?

And on policy, did the Greenspan-led Fed end with a period of too-easy money and a too-easy attitude toward the rise of risky "exotic" mortgages, which contributed to an overblown housing boom – and now a painful housing bust?

These questions don't have simple answers, but these are two areas where it's likely Greenspan could have done better.

This doesn't detract from his notable achievements. And no Fed chairman is held to a standard of infallibility. The difference with Greenspan is that somehow he acquired a mystique that few of his Fed peers ever do.

He presided over an era when the economy's arch-enemy of inflation was on the run partly because of global forces. Several billion formerly communist workers flooded into world labor markets, and helped hold prices in check.

Greenspan notes that his successors may face a tougher time. He cautions that unless future Fed policymakers retain their mandate to keep inflation in check, the interest rate on 10-year Treasury bonds, now below 5 percent, could hit double-digits.

This book, as a whole, sounds a useful warning against that sort of "age of turbulence."

• Mark Trumbull is a Monitor staff writer.

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