Do you remember the Autumn of 1987? Blightey got hit by a hurricane and the stock market crashed. No doubt Alan Greenspan remembers that time well too. He hadn’t been governor of the US Federal Bank for five minutes when shares went a tumble.
In fact, a change over at the Fed often seems to be accompanied by turmoil. Before Greenspan, it was Paul Volcker, who took up his seat in 1979, and faced with high inflation, upped rates leading to a nasty recession.
And now some fear the next changeover could herald a rough time.
It seems certain that Mr Greenspan, who is most remembered for his irrational exuberant warnings before the dot com bubble burst, and most often criticised for going too far after the events of September 11 2001 and boosting the economy too much, will leave his successor, Ben Bernanke, due to take over tomorrow, with one present. The US rate of interest is set for its 14th rise in succession today,
Spelling champ, Bernanke, - as a boy he was the South Carolina spelling champion, is known as a blunt speaker. No coded messages from him, if rates need to go up, he will say so.
But just as there is a chink in his armour, (for the hapless Mr Bernanke did not reach the US national spelling final, because he was unable to spell that word which is so crucial to running a central bank - he mis-spelled the word ‘edelweiss’); there is also a chink in the legacy left to him by Mr Greenspan.
Many describe Greenspan as the best Fed governor ever, but he hands over at a time when the US consumer is in crisis. Last year the US savings rate was negative. That is to say, Americans spent more than they earned, creating a savings rate of -0.5%. It’s the first time that has happened since 1932-33.
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