and federal deficit, 69–71, 94
and Greenspan reappointment, 78, 81–84, 152, 196
media and, 62
negative economic conditions faced by, 94–95, 151
recession and, 75–76, 83
turf wars in, 81–82
business:
basic economics of, 22
capital investments of, 111–12, 137, 160, 168, 195, 223
competition in, 137, 196, 215–16
inventory patterns in, 112
job insecurity in, 168, 169, 176, 180
jobs created in, 175–76, 222
labor costs in, 172–73
labor shortages in, 196
new, formation of, 129
productivity in, see productivity
profits and, 112, 129, 149, 166–68, 169, 171–73, 178, 195
restructuring of, 94, 150
and return on investment, 195
service sector, 174, 175
Business Council, 67, 94, 137
business cycles, 35, 180
BusinessWeek, 174
capital expenditures, in technology, 111–12, 137, 160, 168, 195, 223
capitalism:
credit as engine of, 2 8
free markets in, 46, 74
international spread of, 149
laissez-faire, 217
nurture of, 194
poverty and, 209
wage and price controls in, 35
Carter, Jimmy, 16, 160
Carter administration, 107
Carville, James, 100, 160
central bank, defined, 245–46
chairmanship:
amorphous nature of, 22, 77
asymmetric directives of, see asymmetric directives
as best job in the world, 222
Board of Governors and, 17, 158
consensus as goal of, 17, 18, 49–50, 69, 107–8, 185–86
credibility of, 33, 121
dealing with the unexpected in, 102
elections and, 21, 158
enhanced consultation of, 77
evolution of, 2 2
independent nature of, 17, 23, 84, 88, 151, 152
intellectual interest in, 224
maneuverability in, 106–7, 170
media and, 133
policy speeches and, 145–46
political power to, 227
roles of, 3 0
stress of, 2 19
total control of, 50, 81, 131, 156, 210, 227
uncertainty and, 33, 34
Cheney, Dick, 68, 75–76
Chicago Federal Reserve Bank, 46–47
Chicago options exchange, 44
Churchill, Winston, 94
Citibank:
collapse threat of, 72–73
in financial networks, 39
Citicorp:
and Korean crisis, 191
LTCM and, 205–6
Clinton, Bill:
approval rating of, 108
conceptual ability of, 97
and economic growth, 150, 151, 155
economic plan of, 100, 108–9, 110, 116–17, 123, 125, 160, 221
election campaigns of, 94, 97, 118, 126, 141, 160, 164–65, 222–23
election of, 94, 178
Greenspan and, 95–97, 99, 101, 108, 116–17, 123, 125, 148, 151, 159, 195, 220–24
history as viewed by, 223
impeachment and, 208, 2 14, 216
as intellectual pragmatist, 97
NAFTA and, 142
as New Democrat, 117
Starr and, 195, 196–97, 200, 202
Clinton, Hillary Rodham, 100, 197
and health care reform, 98, 106, 109, 117, 222
and personal issues, 222
Senate campaign of, 221
Clinton administration, 98–101
Asian crises and, 193, 194
bull market and, 179
Council of Economic Advisers, 217, 221
deficit reduction and, 99–101, 103, 108–9, 110, 116, 117, 123, 125–26, 163–64, 221, 223
diversity and, 187
ESF and, 144
Fed appointments of, 125–27, 129, 145, 155–58, 161–66, 183, 187
fiscal discipline and, 123, 147–48, 221
interest rates and, 116, 118, 122, 131, 149, 216
long-term bond rate and, 101
Mexican crisis and, 139–44
National Economic Council and, 117, 150, 181, 187
unemployment and, 122–23
CNBC, 110, 226
Commerce Department, U.S., 60, 110, 177
comptroller of the currency, 190
Congress, U.S.:
and Clinton’s economic plans, 100, 108–9, 110
ESF and, 143–44, 189
Greenspan’s testimony before, 84–85, 100–101, 118–21, 226, 227
Joint Economic Committee of, 118–21
leadership in, 222
Mexican economy and, 141–44
State of the Union addresses to, 100, 221
see also House Banking Committee; Senate Banking Committee
Congressional Budget Office, 163
consumer price index (CPI):
defined, 246
inflation and, 78–79, 80, 103–4, 108, 175
stagflation and, 104
Continental Illinois Bank, 47
Corrado, Carol, 173–75, 177–78
Corrigan, E. Gerald, 159, 175
Citibank and, 72–73
on federal budget, 70
FOMCand, 49, 51, 79, 81, 85
at Goldman Sachs, 203
on maneuverability, 106–7
market crash (1987) and, 38–42, 46, 47
on media leaks, 64
New York Fed and, 85, 121, 200
Corzine, Jon, 202
Coyne, Joseph, 42
credit:
availability of, 39, 40, 42, 46, 198, 223
capitalism and, 2 8
cross default terms and, 201–2
easing of, 27, 246
Fed control of, 2 8
Federal Reserve Act and, 42
inflation and, 104
interest rates and, 31, 70, 71
sources of, 197
sovereign, 42
tightening of, 27–28, 249
credit crunch, 73–74, 85, 212
Cutler, Lloyd, 181
damage control, courage for, 204
Darman, Richard G, 62–63, 71, 82, 88–89 90–91
David, George, ISO deficit reduction:
Clinton administration and, 99–101, 103 108–9, 110, 116, 117, 123, 125–26, 163–64, 221, 223
financial markets and, 117
inflation and, 100, 102
interest rates and, 96, 99, 103, 109, 125
deficit spending, and inflation, 56, 70
Deutsche Bank AG, 194
Dillon, Read & Co., 48, 90
discount rate:
Board of Governors and, 17, 28, 32, 52, 85, 86
defined, 246
Fed communication via, 28, 51, 52, 53, 54, 85
impact of, 17, 32–33
monitoring utilization of, 49
public announcement of, 32, 86–87
discrepancies, importance of finding, 111
Dole, Bob, 142, 143–44, 178
dollar, purchasing power of, 29, 51
Dow Jones averages:
(2500), 32–33
(3871), 121
(4000), 120
(4664), 149
(5117), 153
(5381), 160
(6000+), 178, 180
(7000+), 187
(10000–11000), 216, 222, 225
see also stock market
easing credit, defined, 246
econometrics, 167
Economic Analysis, Bureau of, 60
Economic Club of New York, 103, 148
economic forecasting, see forecasting economic growth:
deficit reduction and, 96
elections and, 141, 160
foreign debt crises and, 141
inflation and, 29, 51, 122–23, 150–51, 155, 183, 196, 215–16
interest rates and, 135
money supply and, 88
natural rate of, 90
negative, 2 9
in new economy, 150–51, 166, 175, 184, 195, 224
recession and, 29, 149
and recovery, 113
soft landing and, 118, 151
stagflation and, 104
sustainable, 29, 109, 188, 221–24
technology and, 195, 196
testing the limits of, 2 16
unreliable data on, 83, 129
economic history, pattern of, 29
economic models, see forecasting models
economic recovery:
blueprint for, 96
capital expenditures and, 111
economic growth and, 113
effects of Fed action on, 116
government spending and, 55, 96
economics, as inexact science, 170
economy, U.S.:
as campaign issue, 52, 94, 160
confidence in, 63, 160, 213, 228
discount rate and, 32–33
expansion of, 2 21; see also economic growth
fed funds rate and, 27
Greenspan as personification of, 214, 227–29
heating up, 31–32, 51, 214
inadequate data on, 175
indicators of health of, 166
jobs created in, 175–76, 222
as liquefied, 115
pro-incumbent-type, 160
in recession, 15, 29, 35
restructure of, 123–24
stock market and, 28–29
uncertainty and, 189, 2 15 Einstein, Albert, 111, 151–52
Eisenhower Republicanism, 117
elections:
board members and, 163, 164
campaigning in, vs. being president, 99
economic growth and, 141, 160
Fed chairmanship and, 21, 158
Fed consensus and, 145
foreign debt crises and, 141
interest rates and, 16–17, 92, 94, 135, 164, 177
soft landing and, 118, 160
European markets, 101–2, 105
Exchange Stabilization Fund (ESF), 143–44, 189
Fed, see Federal Reserve System
Federal Deposit Insurance Corporation (FDIC), 72
Federal Open Market Committee, see FOMC
Federal Reserve Act (1913), 42, 247
Federal Reserve System:
accountability in, 226
as bank regulator, 47, 72–74, 190–91
board of, see Board of Governors
as central bank of the U.S., 247
as central bank of the world, 206–7, 212
credibility of, 33, 59, 62, 118, 176, 213
damage control and, 204, 206
fiscal discipline and, 123
FOMC of, see FOMC
glossary description of, 247
goals of, 109, 132
importance of, 156, 206–7, 212
independence of, 16–19, 50, 94, 118, 148
Jackson Hole retreat of, 131–32, 198, 218–19
lending system of, 40
limitations on, 40–41
and market crash (1987), 38–47
1950s and 1960s history of, 102
Research and Statistics in, 171–74, 2 13
reserve banks in, 2 47
roles of, 17, 29, 247
staff power in, 156
timing of actions by, 115–16, 134, 145
transparency of, 226
treasury secretary and, 17, 50
ultimatums in, 128
voting one’s convictions in, 137
fed funds rate, 27–28
asymmetric directive and, 49–50, 51
defined, 231
impact of, 32, 49, 60, 131, 135
money supply and, 89
political pressure and, 62–63
public announcement of, 121, 212
and short-term rates, 73
Treasury bonds and, 38
and troubled economy, 87
see also interest rates
Ferguson, Roger, 187–88
financial bubble, 122, 217–18
financial system:
availability of credit in, 39, 40, 42, 46, 198, 223
availability of money in, see money supply
bank rescue mission in, 72–74
confidence in, 190, 213
deficit reduction and, 117
free operation of, 41
glossary of terms relating to, 245–49
hedge funds and, 201–2, 247
international, see global economy
market crash (1987) and, 38–47, 48–49, 63, 64, 85, 218
networks in, 39, 117, 124, 197
risk aversion in, 211
uncertainty in, 46, 47
Financial Times, 221
First Options, 47
Fisher, Peter, 201–2
Fitzwater, Marlin, 54
FOMC (Federal Open Market Committee), 27–32
accountability and, 226
asymmetric directives of, see asymmetric directives
budget deficit and, 69–70
as collective body, 213–14
credibility of, 59
as debating forum, 166
enhanced consultation in, 77
explanations from, 128, 130, 133–34
fed funds rate and, 27–28, 32, 49; see also fed funds rate; interest rates
flexibility in, 170
formal vote vs. unilateral action in, 76–78, 80, 92–94
glossary description of, 246–47
perceived consensus of, 49, 106–8, 120–21, 136–37, 176, 202
prepackaged meetings of, 183, 186
roles of, 27–28, 247
staff forecasts to, 134–37, 168–69, 171, 184, 213
suspicion of, 113
tapes of meetings of, 113–14
telephone conferences of, 64, 75, 76, 78–80, 92, 106, 107, 113, 121, 122, 202, 211–12
Treasury bonds and, 38
uncertainty and, 75
voting members of, 27, 246–47
Ford, Gerald, 35, 57–58, 97, 160
Ford administration, 20
Council of Economic Advisers in, 30, 57, 104, 110, 157
recession and, 104
Forecasters Club, New York, 184–85
forecasting:
as inexact science, 118
no alternative to, 118
past numbers as irrelevant in, 170, 185
forecasting models, 30, 57, 183
exaggerated confidence in, 213
expectations in, 167
historical basis for, 122
inadequacy of, 29, 104–5, 137, 168, 170
mathematical, 167, 199, 217
NAIRUin, 168
one year’s data in, 169
reliability of, 83, 112, 174–75, 185, 227
for stock market, 217–19
theory of wages and efficiency in, 169
Francis Boyer Award, 179
free markets, 35, 45
anti-inflation moves and, 176
confidence in, 190, 207
finding their own level, 64, 190, 200
interconnectedness of, 190
Mexico’s move toward, 139
prices set by, 43
prosperity and, 209
as psychological animals, 141
in real estate, 74
regulation vs., 194–95, 207–8
risk taking in, 139
as self-regulating, 205
uncertainty and, 46, 47, 207, 209
free trade, 117, 142, 196
Friedman, Milton, 115
full employment, concept of, 122–23
Full Employment and Balanced Growth Act (1978), 132, 226
futures market, 44, 45, 48
Galileo, 104
Gates, Bill, 203, 204
General Electric, 61
General Motors, 44
Gergen, David, 108
Gingrich, Newt, 142, 144
Ginsburg, Ruth Bader, 181
global economy:
Asian markets and, 189–90, 194
central bank for, 206–7, 212
competition in, 196
confidence in, 202
Fed influence in, 156, 192, 2 12
foreign debt crises in, 140, 144
free trade in, 117, 196
inflation signs in, 105
interconnectedness in, 189, 198–99, 201, 207
international bank regulator in, 194
Japan and, 94–95, 180, 190
Korean crisis and, 189–92
LTCM and, 199–200, 203, 206, 207
media on, 198–99, 214
Mexican crisis and, 138–44
Russian default and, 197–98, 199–200, 206
systemic impact in, 140
technology and, 139, 190
Thai crisis and, 188–89
unpredictability in, 189
glossary, 230–34
Goldman Sachs:
in financial networks, 39, 117, 197
LTCM and, 199, 202, 203, 205
profits of, 191
Gonzalez, Henry B., 113
Gore, Al, 97, 110, 116, 159, 222 Gore, Tipper, 100
government, federal, as debt free, 223
government regulation, vs. free markets, 46, 194–95, 207–8
government spending:
defense cuts in, 99
and economic recovery, 55, 96
entitlements and, 109
and inflation, 56
productivity and, 109
reduction in, 99–101
Graham, Katharine, 181
gravity, law of, 196
Great Depression, 37, 42, 65
Greenfield, Meg, 164
Greenspan, Alan:
awards to, 58, 179
and basic business economics, 2 2
on business cycles, 180
business experience of, 30, 34, 57
as candidate for chairmanship, 20–21, 22, 24–25, 30; see also chairmanship
confrontation avoided by, 57, 64, 75, 77, 79, 108, 136, 146, 156–57
consensus building by, 20, 49–50, 51, 52, 69, 72, 86, 92–94, 101, 107–8, 119–22, 128, 129–31, 133–34, 136–37, 144–46, 161, 175–77, 206–7, 215–16
as cult figure, 214, 219, 226, 227
on delivery of bad news, 53
detachment of, 228
early years of, 54–56
FOMC and, see FOMC
and free markets, 35, 200, 207–8
independence of, 84, 151, 152–53
intuition of, 120, 153
language spoken by, 169, 218, 226, 227
and market crash (1987), 37–47, 48, 227
marriage of Mtchell and, 180–81
as math whiz, 22, 30, 34, 55, 126, 152, 167, 219, 220
Mexican debt crisis and, 138–44
as national tuning fork, 219
opaque statements of, 28, 30, 119, 147, 169, 179, 189, 198, 218, 227–28
operating style of, 54, 64, 77, 79–80, 86, 226–29
perceived strengths of, 213–14, 222–23