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Economists pay homage to Alan Greenspan

As the financial community pays homage to US Federal Reserve chairman Alan Greenspan, set to leave the powerful post in five months, many are also pondering the future without the leading US economic guru.

Greenspan was given a tribute to his 18-year legacy at the recently concluded economic forum in Jackson Hole, Wyoming, amid intense debate on how to fill the void he will create when his term ends on Jan. 31 next year.

"While there are some negatives in the record, when the score is toted up, we think he has a legitimate claim to being the greatest central banker who ever lived," Alan Blinder, a former Fed vice chairman, said in a paper delivered at Jackson Hole with his colleague at Princeton University, Ricardo Reis.

"His performance as chairman of the Fed has been impressive, encompassing and overwhelmingly beneficial -- to the nation, to the institution and to the practice of monetary policy," Blinder said.

Blinder and Reis said it will be hard to fill the shoes of the Fed chief, since "the financial markets now view chairman Greenspan's infallibility more or less as the Chinese once viewed Chairman Mao's."

Greenspan managed to keep the US economy on a steady path despite the 1987 stock market crash, the savings and loan crisis, global currency crises in Mexico, Russia and Asia, the dot-com boom and the terrorist attacks of 2001, Blinder said -- and with just two recessions during his tenure.

The reason for his success, the economists wrote, is that Greenspan did not use a prescribed formula but was able to analyze and respond to each situation.

"The secret to Greenspan's success remains a secret," Blinder and Reis wrote. "When the next leader of the Fed takes his seat behind the chairman's desk and opens the top drawer in search of Alan Greenspan's magic formula, he will be sorely disappointed."

Blinder and Reis said analysts will debate whether Greenspan's success was the result of skill or luck.

"While Alan Greenspan may have enjoyed more than his share of good luck during his storied tenure as Fed chairman, he was also confronted with a wide variety of challenges that required subtlety, a deft touch and good judgment," Blinder said.

"And the maestro surely wielded the chairman's baton with extraordinary skill. His stellar record suggests that the only right answer to the age-old question of whether it is better to be lucky or good may be: both," he said.
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