The Maestro

Alan Greenspan is the former Chairman of the Federal Reserve Board, the US Central Bank. He was widely hailed as an excellent Chairman throughout his tenure, but some cracks are starting to appear in his reputation.

For one, he continued with an expansionary monetary policy even when most analysts expected interest rates to rise. At the time, this appeared to be a masterstroke- the economy continued growing at a fast rate without the resulting inflation that economists feared.

But now there is an alternative interpretation given to this expansionary policy, and one that implies that he was less than the maestro many had thought. Maybe Greenspan's expansionary policy fueled increased inflation afterall- just not in the prices of consumer goods and services that we track so carefully.

I'm talking about asset prices, of course. Low interest rates encouraged US households to over-invest in real estate, driving up property prices, and creating a property market bubble that is now in the process of deflating. The bubble, and the consequent bust, would most likely have been less severe without the active help of the Greenspan Fed.

We could go further. Indeed, one insightful journalist - Caroline Baum at Bloomberg- has listed a range of excellent questions that she'd like to pose to Greenspan, that together read like an attempt to bring the Maestro from his pedistall back down to earth. Read her article here.