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People (November 2005)

(Source: Wikipedia, the free encyclopedia and ABCNEWS.COM) Alan Greenspan, PhD, is an American economist and Chairman of the Board of Governors of the Federal Reserve of the United States. He is considered by many to be the leading authority and key participant concerning American domestic economic and monetary policy. According to Answers.com, Alan Greenspan has been charirman of the Federal Reserve, and one of the most powerful financial men in America, since 1988.

Dr. Greenspan was born to a Jewish family in New York City in 1926. He is known as an accomplished saxophone player and studied at Juilliard from 1943 to 1944. He then attended New York University, and received a B.S in Economics (summa cum laude) in 1948, and an M.A in Economics in 1950. He was awarded a Ph.D. in Economics in 1977, although he did not complete a dissertation. He also attended Columbia University for advanced graduate study.

During the 1950s and 60s Greenspan was a friend of author-philosopher Ayn Rand and a proponent of her Objectivist movement, which, among other things advocated unfettered capitalism as a social and economic philosophy. He wrote articles for Objectivist newsletters, and contributed several essays for Rand's 1966 book Capitalism: the Unknown Ideal. Greenspan continues to support a gold standard and advocate laissez-faire capitalism. His support for a gold standard is somewhat of an irony given the Federal Reserve's role in America's fiat money. He has come under heavy criticism from Objectivist philosophers, most notably Leonard Peikoff and Harry Binswanger, as they believe that working for the Federal Reserve is an abandonment of Objectivist and free market principles.

Before his appointment to the Federal Reserve System Board of Directors, Dr. Greenspan served as a corporate director for Aluminum Company of America (Alcoa); Automatic Data Processing, Inc.; Capital Cities/ABC, Inc.; General Foods, Inc.; J.P. Morgan & Co., Inc.; Morgan Guaranty Trust Company of New York; Mobil Corporation; and The Pittston Company. From 1974 to 1977, he was Chairman of the Council of Economic Advisers under President Gerald Ford.

On June 2, 1987 President Ronald Reagan nominated Alan Greenspan to succeed Paul Volcker. After the nomination, bond markets experienced their biggest one-day drop in 5 years. Some feared that Greenspan would be a more political chairman. The Senate confirmed Greenspan on August 11. Just two months after his confirmation he was faced with his first crisis, the 1987 stockmarket crash. The most famous example of how his closely-parsed speeches affected stock markets was his December 5, 1996 comment about "irrational exuberance and unduly escalating stock prices" that led Japanese stocks to fall 3.2%.

On May 18, 2004, he was nominated by President George W. Bush to serve for an unprecedented fifth term as Chairman of the Federal Reserve. He has been appointed to this post by Presidents Ronald Reagan, George H. W. Bush and Bill Clinton. Greenspan's term as a member of the Board is scheduled to end on January 31, 2006, and Ben Bernanke was nominated as his successor by President Bush on October 24, 2005. Greenspan was awarded the Presidential Medal of Freedom, the highest civilian award in the United States, on November 9, 2005 by President George W. Bush. His honorary titles include Knight Commander of the British Empire, bestowed in 2002 and Commander of the Légion d'honneur (Legion of Honor). He married NBC journalist Andrea Mitchell in 1997.

How much does Greenspan matter, and why?

ABC News says, he is the ultimate guru, the Uber-analyst. No one else frames the economic trends with the authority he does. No one else is perceived to have his finger on the economic pulse like Greenspan. He seems to be able to hear the economic mood music like a dog hears a high-pitched whistle. Investors feel they can rely on his macroeconomic guidance.

He helps stabilize the markets through his signaling. His tone is soothing and the phrasing wonderfully euphemistic. His statements always imply gradual economic change, which is generally the nature of large economies, and suggest similarly gradual policy changes. The implicit message in his modulated approach is that you investors have a bit of time to unwind dangerous positions. In short, the Fed is not in the business of bailing you out of losing positions, but under Greenspan it will give as much of a heads-up as possible.

And it also says, "In a crisis, investors have good reason to believe that Greenspan won’t make a bad scene worse. With the exception of the 1987 stock market crash when he was still a rookie, Greenspan has been outstanding in panics. With President Clinton and former Treasury Secretary Robert Rubin, he has handled the Mexican crisis, the Asian crisis, the Long Term Capital Management crisis and numerous smaller financial conflagrations with a steady hand. You can have some confidence that he will not let the financial system collapse through policy errors."