After a victorious campaign, Roman generals used to be rewarded with a triumphant parade through Rome. They were feted like gods, but standing behind the general on his chariot stood a slave. His job was to keep the general’s feet on the ground by whispering: ‘Look around you, remember you are mortal.’
Alan Greenspan, chairman of the US Federal Reserve, has been hailed as godlike for years but if he ever needed a slave whispering in his ear he doesn’t now. After overseeing one of the longest economic booms in American history, Greenspan is now busy cutting interest rates in an attempt to keep the US economy from recession. So far, this change in America’s fortunes has done little to dent his reputation, but he faces a difficult few years ahead.
One of his problems is the amount Americans invest in stocks and shares.
That’s fine when the market is booming but when it takes a dive it can have a massive effect on the economy. People feel poorer immediately and change their spending plans quickly, making it more likely that a collapse on Wall Street will lead to a recession.
The best way to stop a bust is to prevent the boom that precedes it and Greenspan did warn against the dotcom boom in share values. I remember when he said some internet companies weren’t worth their over-inflated share value. The trouble was all net shares rose on his warning, it was taken as evidence that the inflated share prices of some dotcoms was justified.
There’s not much point in Greenspan reminding anyone now that he was right. But having failed to get people to listen to his warnings he has to deal with the consequences. That will be a tougher battle.
If he cuts interest rates fast enough and far enough to prevent a recession, he will be lauded once again as a hero.
But as many Roman generals knew, success and fame are fickle. If he fails now all those economic victories will be forgotten and he will be seen as all too human.
– Jonty Bloom is a business news reporter at the BBC.
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