and productivity data, see productivity reappointment of, 78, 80, 81–84, 152–53, 155, 158–60, 162, 164–66, 168, 170, 196, 219, 220–24
risk avoidance of, 154
silence of, 132–33, 146
solidarity shown by, 207–9
successor to, 127, 133, 158, 159
and uncertainty, 56, 75, 117
Greenspan, Herbert, 54, 55
Greenspan, Rose, 54–55
Greider, William, 80
gross domestic product (GDP), defined, 247
Group of Seven (G-7) meeting, 158, 159
Guffey, Roger, 75
Gulf War, 68–69, 71, 75–76, 83, 94, 140
Haig, Alexander M., 35
Harvard speech, 216–17
hedge funds:
defined, 247
global economy and, 208
LTCM, 199–208
Heinz, John, 61–62
Heinz, Teresa, 62
Henry Jerome Band, 55–56
Hoenig, Thomas H, 149
Hoover, Herbert, 42
Hoskins, Lee, 81
House Banking Committee:
Asian crises and, 193
FOMC tapes and, 113–14
Greenspan’s testimony before, 110, 113, 182, 188, 189, 193–94, 207–9
LTCM and, 207–8
see also Congress
Humphrey-Hawkins Act (1978), 132, 226
Hunt, Al, 181
Hussein, Saddam, 68, 76
I/B/E/S, 166–68
inflation:
acceptable rates of, 170
aggressive fighting of, 138, 160, 176
annual rates of, 2 9
bond market and, 102–3
classic environment of, 104–5, 196
consumer price index and, 78–79, 80, 103–4, 108, 175
credit and, 104
deficit reduction and, 100, 102
deficit spending and, 56, 70
defined, 247
discount rate and, 33, 53, 54
economic growth and, 29, 51, 122–23, 150–51, 155, 183, 196, 215–16
expectation of, 52, 61, 70, 96, 102, 103, 116, 145, 146, 170, 247 false signal of, 110
Fed credibility and, 176
fed funds rate and, 28, 51
Fed power and, 42, 126
government spending and, 56
inadequate data on, 175
interest rates and, 18, 51, 52, 102, 131, 168–69
job insecurity and, 180
money supply and, 88
preemptive action and, 146–47, 176, 184
price stability and, 170, 2 16 productivity and, 180, 225
psychology of, 102, 105
soft landing against, 115–16
spending and, 195
uncertainty and, 103–9, 175
unemployment and, 122, 129, 132, 160, 168–69, 170, 176, 177, 183, 185, 186, 216, 217
Vietnam War and, 102
inflation expectations, defined, 247
inflation premium, 95–96, 103
interest rates:
asymmetric directives on, see asymmetric
directives bond market and, 33, 70, 96, 122, 131, 136, 197, 209, 210, 212 credit and, 31, 70, 71
deficit reduction and, 96, 99, 103, 109, 125
discount, see discount rate elections and, 16–17, 92, 94, 135, 164, 177
expectations about, 85, 105, 116, 119, 130, 134, 136, 184
fed funds, see fed funds rate FOMC decisions not to change, 3 5–3 6, 94, 113, 119, 170, 174–77, 187, 206, 215–16
FOMC lowering of, 61, 64, 69–72, 74, 75, 76, 78–80, 81, 86–87, 91–94, 149, 153, 161, 206–7, 210–12
FOMC raising of, 32–33, 51, 52–54, 59–60, 105–8, 116, 118–22, 128, 130–31, 134–37, 144–46, 149, 184, 188, 222, 224, 225 future impact of, 22, 29, 32, 115, 134–35, 214–15
inexact policy of, 170
inflation and, 18, 51, 52, 102, 131, 168–69
inflation premium and, 95–96, 103
on long bond, 33, 101
long-term, defined, 233
money supply and, 88–89
politics and, 118
public statements and, 146, 210
recession and, 15, 27, 51, 52, 74, 118, 147
S&Ls and, 65
shock effect of, 120, 134, 136
in soft landing, 115–16
and state of the economy, 114
stock market and, 33, 131, 212, 218
timing of changes in, 50
White House desires and, 17, 18, 50, 51–54, 78, 82, 83–84, 87, 88–89, 91, 116, 122, 131, 147–48, 196, 216
interest rate spread, 188, 202, 209
international markets, see global economy
International Monetary Fund (IMF), 189, 193
Jackson Hole retreat, 13 1–32, 198, 2 18–19
Japan:
borrowing low in, 188
economic troubles of, 94–95, 178, 190, 195
Korean crisis and, 190
markets in, 180
job insecurity, 168, 169, 176, 180
Johnson, Manuel H, Jr.:
Greenspan and, 50, 63–64, 78
interest rates and, 51–52, 53–54
market crash (1987) and, 37, 39, 43, 46–47
media and, 64, 77–78
S&Ls and, 36
Volckerand, 18, 19
Jordan, Jerry, 212
junk bonds, 36, 65, 94
Kanjorski, Paul, 208
Kavesh, Robert, 57
Keating, Charles H, 65–66
“Keating five,” 66
Kelley Edward W. “Mike,” Jr., 20, 90, 181
Kelley Ellen, 54
Kennedy administration, 160
Keynesian economics, 55, 96, 104
Kissinger, Henry, 181
Korea, economic crisis in, 189–92, 193, 194
Krugman, Paul R., 162–63
Labor Department, U.S.:
productivity data from, 111–12, 171
unemployment data from, 92, 111
lag, between action and impact, 115, 118, 134–35, 145
La Ware, John, 121, 164
Lazard Frères Co, 149–50, 158
Leach, James A, 208, 209
Lehman Brothers, 205
Lehrer, Jim, 181
Lewinsky, Monica, 195, 197, 200, 202, 208, 214, 222 Limbaugh, Rush, 142
Lincoln Savings and Loan Association, 65–66
Lindsey, Lawrence, 91, 112–13, 121, 145, 187
liquidity, 115
Fed guarantees of, 43, 63–64
Fed withdrawal of, 217–18
to payments system, 64
logical positivism, 3 4 long-term interest rates, defined, 248
Los Angeles, Greenspan visit to, 193–94
LTCM (Long Term Capital Management), 199–208, 209
McCain, John, 66
McDonough, William, 159, 175–76, 177
and Asian crises, 197
LTCM and, 200–207, 209
market conditions and, 176, 210–11
and New York Fed, 121, 175, 200, 206
Machiavelli, Niccolò, 211
Mack, Connie, 66–67, 162
McLarty, Thomas “Mack,” 98
McTeer, Robert D, Jr., 2 16
Major Market Index, 45
market crashes, see stock market
mathematical modeling, 167, 199, 217
Mead, Dana, 150
media:
contradictory stories in, 147, 148–49
dissent reported in, 77–78, 174, 185
and global economy, 198–99, 214
Greenspan deified by, 213–14
on Greenspan’s reappoinrment, 82, 84, 158, 221 and hidden bond market, 197–98, 200
interest rate announcements as events in, 226
leaks to, 16, 64, 110
silence and, 133
talk shows, 227
White House press corps, 142, 165–66
see also specific media
Meet the Press, 52, 62, 147–48
Melzer, Tom, 76
Meriwether, John, 199, 200, 204
Merrill Lynch, 39, 44, 197, 205
Mexico:
financial crisis of, 138–44
NAFTA and, 142
Meyer, Laurence H, 165, 170, 183–87, 2 10, 211–12, 215, 216 Mdeast crisis, 68–69, 71, 75–76, 83, 94, 140
Mller, Bill, 107
Mtchell, Andrea, 25, 151, 180–81, 192, 219
Mtchell, Joan, 56
models, see forecasting models monetary policy:
complexity of, 22
defined, 248
gradualism in, 138
stock market and, 182
money, psychology of, 63
money supply:
control of, 91
defined, 248
interest rates and, 88–89
market crash (1987) and, 39–42, 63, 64
measurement of, 62–63, 88
tight, 80
moral hazard, 139
“Morning in America” campaign, 16
Morris, Dick, 151, 222 Moynihan, Daniel Patrick, 109–10, 181
Mozart, Wolfgang Amadeus, 109
Mullins, David, 85–86, 92–95, 106, 107
on Blinder appointment, 126–27
on Bush administration, 94–95
and Clinton administration, 98, 159
on economic growth, 113
andLTCM, 199, 200, 204
media and, 87, 92
resignation of, 125
Myers, Dee Dee, 108–9
NAFTA (North American Free Trade Agreement), 142
NAIRU (non-accelerating inflation rate of unemployment), 122–23, 168, 183, 185, 248
Nasdaq, 224–25
National Industrial Conference Board, 56
New Democrats, 117
New Economy:
Clinton administration and, 151, 166, 195
management of transition to, 184, 185, 187
old wisdom inappropriate in, 150, 175
technology and, 224
Newsweek, 132
New York City, credit of, 161
New York Federal Reserve Bank:
activism and, 200
bank rescue and, 72–73
Corrigan as president of, 85, 200
crash (1987) and, 38–42
FOMCand, 231
LTCM and, 200–207, 209
McDonough as president of, 12 1, 175, 200, 206
open market operations in, 3 8
volume of business of, 39
New York Stock Exchange, 43–45, 179, 217, 218; see also stock market
New York Times, The:
on Blinder, 127, 132, 133
Bush interview in, 91
contradicts Washington Post, 147, 148
on dissent in FOMC, 76, 78
on Greenspan’s reappointment, 84
on interest rate decisions, 108, 177
leaks to, 64
on Rohatyn’s appointment, 162–63
New York University (NYU), 58
Nixon, Richard, 34–35, 97
Nixon administration, 34–35, 108
Council of Economic Advisers, 3 5
wage and price controls in, 3 5
Watergate and, 21, 110
O’Neil, Paul, 150
open market operations, defined, 248
options market, 47, 48
Ortiz Martinez, Guillermo, 138, 140
Panetta, Leon, 141, 147–48, 163
Pardee, Scott, 86
Parker, Robert P, 60, 177–78
Perot, Ross, 94, 178
Phelan, John, 44
Phillips Curve, 184–85
Pluto, discovery of, 196
Podestajohn, 220, 221
politics, nature of, 116
Powell, Gen. Colin, 140, 181
Prell,MchaelJ, 31, 213
prices:
arbitrage and, 208
competition and, 137, 215–16
controls of, 3 5
inflation and, 29, 170, 216
on manufactured goods, 172
productivity and, 172–73
profits and, 167, 169, 173
set by markets, 43
stable, 51, 170, 188, 216
stock market and, 179–80
probability:
relativity and, 151–52
risk and, 117–18, 154
uncertainty vs., 117
productivity:
Baumol’s disease and, 109–10
defined, 248
discrepancy in data on, 111–12, 129, 171–75
economic boom and, 188
government spending and, 109
inflation and, 180, 225
labor costs and, 173, 225
measurement of, 137, 167–68, 174–76, 178
new findings on, 174–76, 177–78, 180, 185, 227
prices and, 172–73
profits and, 167, 171
and restructured economy, 123–24
and return on investment, 195
technology and, 223
theory of wages and efficiency in, 169
Pucci, Richard, 167–68
Quinn, Sally, 181
Rand, Ayn, 34, 56, 74
Reagan, Ronald, 63, 95
economic speeches of, 20
Greenspan and, 25, 91, 97
reelection campaign for, 15–17
Social Security and, 22–23
stock market and, 44
Volckerand, 15–16, 23–24
Reagan administration, 58, 108
budget deficit and, 96, 97
Fed appointments of, 17–18, 21, 125, 152
and Fed independence, 16–19
Iran-contra and, 21
winding down, 49
Reaganauts, 18, 51
real estate market, 74
recession:
Bush administration and, 75–76, 83
Clinton administration and, 160
defined, 29
economic growth and, 29, 149
Ford and, 35, 104
Great Depression and, 37
interest rates and, 15, 27, 51, 52, 74, 118, 147
people most hurt by, 193–94 Recovery Ahead (H. Greenspan), 55
Reed, John S, 72–73, 191, 205–6
relativity, theory of, 151–52
Republic Steel, 57
Resolution Trust Corporation (RTC), 65, 74
risk taking:
confidence and, 207
moral hazard and, 139
probability and, 117–18, 154
Rivlin, Alice, 181, 206, 210–11
board appointment of, 163–66, 168, 170
on Greenspan’s position, 211, 2 13–14
and “irrational exuberance” speech, 179
and productivity data, 177–78
resignation of, 2 15
Robert, Joe, 74
Rohatyn, Elizabeth, 150
Rohatyn, Felix, 149–51, 155–58, 161–63, 165, 166
Rubin, Robert E, 117–18, 122–23, 222
and Blinder appointment, 125, 126
and Greenspan re appointment, 159–60
and Korean crisis, 189–92, 193, 194
and LTCM, 201
and Mexican crisis, 139–44
and Mexican crisis, 139–44
and productivity growth, 171
and Rohatyn appointment, 156–57, 161–63, 165
and stock market, 178–79, 189, 217
and Thai crisis, 189
as treasury secretary, 139, 140–41, 147–48, 149, 150, 159, 179, 195, 216, 220, 224
Ruder, David, 43
Russert, Tim, 181
Russia, default of, 197–98, 199–200, 206
saddle, use of term, 218
Salomon Brothers, 44
Salomon Smith Barney, 205
Samuelson, Robert J., 132
Sanders, Bernie, 208–9
savings and loans (S&Ls), 65, 195
junk bonds and, 36, 65
real estate market
and, 74
Schwartz, Bernard, 150 Secrets of the Temple (Greider), 80
Securities Act (1933), 44
securities analysts, as optimists, 166–67
Securities and Exchange Commission (SEC), 43, 45
Seger, Martha R., 52, 70
Seidman, William, 65
Senate Banking Committee:
board members confirmed by, 161–63, 164, 168
chairmen confirmed by, 17, 25, 159, 170
Fed independence and, 50
Greenspan's testimony before, 101, 146
see also Congress
Shalala, Donna, 164
Sharpe, Steven A., 149, 166–67
short selling, 199, 233
Slifman, Larry, 171–75, 177–78
Smart Women’s Club, 164
Social Security, reform of, 20, 22–23
Socrates, 211
soft landing:
economic growth and, 118, 151
elections and, 118, 160
hard landing vs., 128, 135, 217–18
metaphor of, 122
as slowdown without recession, 147, 149
success of, 160
theory of, 115–16, 147–48
Soviet Union, collapse of, 94
Sperling, Gene, 187–88, 195, 216, 218–19, 220, 221, 228
stagflation, 104
Standard & Poor's 500 companies, 166–67
Starr, Kenneth W., 141, 195, 196–97, 200, 202
statistics:
disaggregated, 171–72, 175, 185
nature of, 171
unreliability of, 83, 112, 129, 171, 174–75
Stephanopoulos, George, 222
Stern, Gary, 170, 177
Stockman, David, 58
stock market:
bond market and, 198
computerization of, 48
confidence in, 43, 45, 63, 79, 190, 202
crash (1929) of, 37, 42
crash (1987) of, 36–47, 48–49, 63, 64, 85, 190, 218, 227
dot.com stocks in, 224–25
Dow and, see Dow Jones averages
fear and, 50
Fed options in, 37
forecasting models of, 217–19
hedge funds in, 199, 201
impact on economy, 28–29
interest rates and, 33, 131, 212, 218
irrational exuberance in, 179–80, 182, 195, 218, 226
media leaks and, 64
monetary policy and, 182
numbers of investors in, 196, 217
optimism and, 166–67
as overvalued, 178–79, 182–83, 217
prices and, 179–80
shared responsibility in, 45
soft landing for, 217–18
speculation in, 122
strength of, 149, 178–79, 189, 195
trading stopped in, 43–44, 48
uncertainty and, 178–79, 189, 190
volatility in, 218–19
stocks, defined, 248
Stone, Donald, 44
Strauss, Bob, 181
Stull, Jim, 36
Summers, Lawrence H., 187, 195, 216
and bond market illiquidity, 198
and Korean crisis, 189, 191–92, 193, 194
and Mexican crisis, 138, 139–41
and productivity data, 171