Filling the shoes of Greenspan

Article based on ‘Rational Exuberance: The new Chairman of the Federal Reserve has large shoes to fill’, The Times newspaper

Emulating success is a hard job. Harry Truman found great difficulty assuming the US presidency after death of the Great Depression taming Franklin Delano Roosevelt. Continuing success is never easy as Wilf McGuinness clearly showed, when he took over from Sir Matt Busby as the manager of Manchester United, who had created one of the finest teams in Europe – Manchester United were soon relegated.

Ben Bernanke, the successor of Alan Greenspan, faces the same task. Will he be able to cut the mustard as Fed Chairman? This is the most important economic policy job in America and indeed the whole world. By controlling interest rates and inflation, the value of the dollar is affected, which is the world’s main currency reserve. As the new Chairman of the Federal Reserve, Bernanke’s decisions will affect billions of people beyond America’s shores.

For the past 18 years, Greenspan’s wise and occasionally impenetrable utterances have ruled US, and therefore world markets and have often silenced his unwavering critics who were taken aback when Greenspan correctly spotted, before anyone else, that the US economy had changed by the early 1990’s, so that it could develop at a faster pace without being threatened by inflation.

During his tenure, he showed his brilliance through his admirable qualities. He understood the nitty-gritty of finance, had flair and was loved by the markets. However, Bernanke can be reassured that Greenspan’s performance is not necessarily stellar as staunch fans insist. Mr Greenspan was lucky to be on the scene when the Chinese and Indian economies began to take off and was privileged to take up the legacy of Paul Volcker, his predecessor, who did much of the hard work.

Nevertheless, Mr Bernanke is fully qualified to manage the financial markets that can rise and fall on his every word. He needs to show the world that he can respond to changing events by means other than a textbook. But, what he does promise is to be a direct communicator, as opposed to a cryptic one. We shall soon find out what he is talking about.