Homage to Alan Greenspan: The Greatest Poetical Economist who Ever Lived

A Satire

I just read about Alan Greenspan, the former chairman of the US central bank, what he has to say about the current credit squeeze and I remembered how strange Greenspan's statements were when he was still the head of the US central bank, but since he retired as chairman his statements have become even stranger with the sad twist that when he was in office, his statements were wrapped in enigma and his wordings had the strangeness of "Finnegans Wake"; since he left office, Greenspan's statements have become bland and are deprived of the mystery of poetry. Alan Greenspan, this great poetical economist, whose financial analyses were like poetry when he was in office, has become a financial market rapper in old age.

With Alan Greenspan gone as the Chairman of the Federal Reserve some time ago, we already miss him dearly. We miss him less for his performance as central banker. What we will really miss are his poetic performances.

After all, who other dismal economist has pleased us with such verbal creations like "irrational exuberance" to characterize the stock market boom, or "conundrum" when the bond market does do things we do not understand. And does anyone remember? He once called the housing bubble "froth". The irony of this term has become clear only more recently.

Greenspan was the maestro in teaching us to say something seemingly important hidden in a maze of meaningless words. Any student of economics would do well studying Greenspeak before taking an exam, and politicians can boost their careers with a few lessons from the great chairman.

I myself have always been a devout student of Greenspan's verbal virtuosity, have tested it. And it works. And my life has changed for the better.

When I came to Brazil a couple of years ago, I was invited to participate in a TV talk show about economics. In Brazil, economics gets the late, late hour, after the comedies and after soccer. So it was almost midnight when our show started, and with the talk show dragging on, I got tired. So when suddenly towards the end of the show while I was half asleep, the host asked me in Portuguese, a language that I hardly knew, "And you, professor, what do YOU think about this issue?" I had no idea what they had been talking about.

Having had no idea about what was being asked, I could have asked the host: "Could you repeat the question?" or, remembering Bill Clinton, I could have said that it depends on how you define it, particularly what "is" is. The risk of these counter-questions is that, after the second time, you still do not understand the question, and then you really look dumb. But this was no way for me as a person trained by hours of watching TV when Greenspan gave his testimonies to the Congress and the Senate, a show that I tried never to miss.

So what did I answer? I said nothing but I said it in a way, which answers everything. I spoke slowly (pondering of what to say), and with a face conveying total seriousness and a deep concern (I think I may have even looked a bit like the great chairman). And then I spoke up: "Well, considering all these issues in their details, which is always necessary faced with complexity, and regarding our common concern, one should not leave out the essential point of the issue, which, in this case, but not only here, actually in all matters of this and similar problems in economics (I still had no idea of what I should say) amount to accepting that in the end, and after considering all circumstances and particularly the details of the concrete situation and episodes, which always tend to change" - by now I got the way out and I said full of conviction, from the bottom of my heart so to speak - "it is the basic economic laws that must always be taken into account and heeded".

This response of mine may seem as stupid as it can get, but for my colleagues the other day, it was the message of the day, having said the right thing. Yes, so they said, I made it clear what really matters. Some days later, in the street, I also got my ovation by an unknown person who recognized me from the TV show. He said: "If we just had more like you who have the courage to tell the truth".

This was my lesson of the benefits of Greenspeak. I now use this technique with my wife, and it works here, too.

Years ago, when she would ask me for example "Did you see my cell phone?" I would just plainly say. "No". And this was not good. Now, after studying under Greenspan how to respond to questions whose answers I do not know, I would say: "The problem with cell phones is that they get easily lost, because they are so small and technological progress makes them smaller every year - no wonder that once they are lost, they are hard to find. We shall finds means, though, to find it, don't worry."

I now use this technique everywhere. If someone asks me about what I think of US foreign debt, I would no longer say that it's the path ruin, instead I would say: "Well, I thank you for this question that has been on my mind for quite some time and which is of great concern to me as well, and I appreciate it very much to discuss this issue with you, that you have brought up."

Here I would pause, as if I were thinking, and then continue:

"Let me please state my position as clearly (actually practicing obfuscation) as I can: As you know (do not challenge it, you might look stupid if you do), in terms of balance sheet analysis, every debit has as its equivalent an entry as a credit, and in these definitional terms financial markets are always in equilibrium. Nevertheless, I am convinced that the Federal Reserve System is carefully observing these trends, for which there are few if any precedents."

By this I offered my respect to my interrogator, but I also made it clear that things are very, very complicated. This way, by extending my respect and by making him or her look stupid in case he or she were to dispute the obvious, I opened my way to show off how deep my thoughts are, and thus I would continue: "Although not as a rule, economic imbalances may occur, but market operators, too, observe these deviations, and there is a tendency to correct them. However, in certain periods of financial stress, if economic imbalances might be perceived, or when they are not easily identifiable, and when they might negatively impact on the financial system - such rare events may indeed overstretch the resilience of our otherwise highly flexible financial system, and it is for these extreme cases, for which central banks were created. The Federal Reserve will be prepared to provide sufficient liquidity, if need be, but also taking into account the trade-off with potentially adverse collateral effects, such as increases inflationary pressures, which, however, can be neutralized when impacting negatively on our overall set of goals and economic performance. The central bank will, I am sure, perform its function, which has been bestowed to the Federal Reserve."

Step by step, more and more people now regard me as the new financial guru. Alan, I miss you, my beloved economic poet. I am sure that your successor can never live up to your greatness as poetical economist.

P.S. To my dismay, I have recently learned that Alan has formed a kind of financial rap band (after all he is an accomplished musician) since he left office. Now he performs for a different audience, and he is doing his sessions for money, and his new audience, of course, won't pay him for poetry - particularly not for financial Finnegan's Wake (for those readers who may wonder why at the top of the article Finnegan is without an apostrophe, and at the bottom it is).

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