Word: greenspan
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...Democrat won the presidency 16 years previously--"the economy, stupid." Some experts argued that the economy had never stopped mattering. Bush won in 2000 because the dotcom bubble burst that year. He won in 2004 because his tax cuts and the easy-money policies of Federal Reserve Chairman Alan Greenspan had generated a sustained economic recovery. Unfortunately for the Republicans, that recovery could not last forever...
...Greenspan's successor at the Fed, the academic economist Ben Bernanke, was in a quandary. Should he worry about growth or inflation? Inflation was creeping up, and yet the combination of higher interest rates and higher fuel prices threatened to depress consumption. Bernanke's apparent indecision unnerved the financial markets. By the time the slide in real estate prices signaled the onset of a full-blown recession, the Fed was badly behind the curve...
Whether the eight-year boom was really a bubble remains a matter of debate among economists. No less a sage than Alan Greenspan started warning of "froth" in the market in May 2005--and the Fed has raised interest rates 17 times, at least partly to dampen speculative housing activity. Yet the party outlasted several years' worth of doomsday predictions. And for every bubble guy, there's one who thinks prices overall are about right, given mortgage rates that are still low by historic standards and other measures of affordability. "My view is that the run-up of home prices...
That new approach was on display in the Senate as Bernanke answered questions with a level of precision unknown during Greenspan's 18-year tenure. Greenspan had become famous for long, convoluted answers that could stop time but only rarely ("irrational exuberance") ruffled the markets. Asked about the nation's blooming deficit, Bernanke answered crystal clearly, "Deficits matter because they represent additions to debt that our children and grandchildren will either have to pay through higher taxes or reduced services." Bernanke's wit also made a guest appearance. When Maryland Senator Paul Sarbanes asked Bernanke whether rising rents and their...
...data aren't helping. Bernanke looks at about 25 sets of data a day, and often they are at odds with one another. While Greenspan had a penchant for obscure statistics, like the production of No. 5 trucks, Bernanke sticks closer to mainstream data. "I never knew what a No. 5 truck was," says Alan Blinder, a former Fed vice chairman and a professor at Princeton. "Bernanke probably doesn't either." The minutes from the May meeting of the Fed committee that sets rates showed that opinions ranged from doing nothing to raising rates 0.5%. The Fed raised rates...