Economist's View: The Never Ending Greenspan Story: Andrew Balls of the Financial Times: "Mr Greenspan took over at the Fed on August 11 1987 – less than two weeks before “Black Monday”, when the Dow Jones industrial average dropped 22.6 per cent; the largest daily fall in the history of the US stock market. Mr Greenspan’s immediate response, saying the Fed would pump money into the financial system to maintain liquidity, helped to put an end to worries about how the central bank would fare after the departure of Paul Volcker, his predecessor. … Mr Greenspan has cemented the Fed’s anti-inflation credibility but his reputation has been built on the flexibility he has shown. The challenge for his successor will be to match Mr Greenspan’s record of getting the big calls right. …"
For those looking for a trigger point on our looming economic problems, the replacement of the Fed Chair, at the end of 2005 -- assuming Greenspan lasts that long, his health is not good -- may be one. Fear and uncertainty can be focused by the changeover. And, I, for one, had forgotten that a stock market crash had followed his accession.
The adults in the Republican Party have signalled that Bernard Bernake will be Bush's choice. But, does Bush know that?