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Wednesday, 13 December, 2000, 17:17 GMT
Greenspan the Maestro
Alan Greenspan, Federal Reserve Chairman
Alan Greenspan made his reputation in investing circles as an investment strategist and market foreca
By the BBC's Rodney Smith

Back in 1990, no-one foresaw how the world economy would develop.

The tech-driven economy has grown faster and more powerful than even its supporters had predicted.

The increase in the power and influence of the East Asian economies, although blighted by inflexible and uninspired leadership, at that time seemed unstoppable.

And many in America in 1990 feared that the European Union would have become a powerhouse to challenge the US.

Federal Reserve building, Washington, USA
Greenspan at the Federal Reserve - doubtless his early baptism of fire tempered him swiftly.

That it has not, has much to do with many influences.

One was the emergence in the US of an understanding of how its economy and its marketplace functioned, at a time when Europeans were still struggling to bring together existing economies rather than modifying them.

Among those leading the process in the United States was the chairman of the US Federal Reserve Board, Alan Greenspan, musician and mathematician turned central banker.

Now in a new book, Maestro, Bob Woodward's excellent and very readable, if occasionally slightly confused biography of Greenspan and his terms at the Fed tracks the central banker's swift learning curve after he took the office.

Hard act to follow

Greenspan came to the Fed with a hard act to follow.

Paul Volcker, the towering monetary chief who had thrust back inflation with the sword of monetary policy like no central banker before him was a legend who had to be deposed by politicians who knew they could not bend him.

If they hoped to bend his successor, they were mistaken.

Alan Greenspan had already made his reputation in investing circles as an accomplished investment strategist and market forecaster.

Doubtless his early baptism of fire, when US and world stock markets collapsed in October 1987 just after he took office, shaped his approach.

Realising what few others without his market knowledge and experience could, the greenhorn banker turned the Fed into a lender of last resort to an embattled banking system.

The trick worked, confidence was restored, Wall Street gathered itself together and the rest of the world took heart as well.

Never investigated but hinted at by Mr Woodward is the possibility that there may have been collusion, illegal in US law, between some of the banks to support the market to help restore confidence.

Compelling look

This is a compelling book about a figure who has done as much to shape the American world of today as any recent politician.

He was the first person to realise how important the development of the new economy was, and how rapidly it was changing and discarding the old rules.

But mathematician and skilled market psychologist that he is, even Alan Greenspan admits that his decisions frequently rely, finally, on gut feeling rather than intellectual certainty.

The subject is not unfamiliar to Bob Woodward, an accomplished recorder of the machinations of the movers and shakers in Washington.

In 1994 he wrote Agenda, which examined the economic policies of Bill Clinton.

He brings to life Alan Greenspan's slightly gawky personality; his awkwardness with ordinary language, how his proposal of marriage to his present wife, Andrea Mitchell, was so cautiously worded that she only understood him on the second take.

Most of all, Bob Woodward's book outlines some of the complex thinking behind the brains that have played no small part in generating the most stunning economic success story in recent history - America's amazing 10-year economic boom.

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