Economy's best friend is sticking around

Alan Greenspan: His flexibility will be vital as high-tech innovations alter views on growth and inflation.

January 10, 2000

HE'S the Babe Ruth of financial markets. The Clark Gable of Wall Street. The Dwight Eisenhower of capitalist Main Street.

Alan Greenspan is this nation's celebrity central banker. His firm but flexible hand helped pull the United States out of recession. He then set a course that has spawned the greatest economic expansion.

Now Mr. Greenspan, 73, has agreed to serve another four years as chairman of the Federal Reserve. President Clinton's reappointment drew huzzahs from Democrats and Republicans. They know most Americans credit Mr. Greenspan for the good times.

When stock markets crashed in 1987, shortly after his first term as Fed chairman, Mr. Greenspan opened up the central bank's loan windows, stemming a potential recession. When the downturn occurred a few years later, he slashed interest rates and averted collapse of financial institutions.

This laid the groundwork for the economic recovery that continues to this day. The Fed chairman has remained vigilant against any hint of inflation -- ratcheting up interest rates three times last year.

But he's also shown remarkable agility in abandoning long-held economic theories torn apart by rapid changes in technology that have allowed companies to cut expenses and increase productivity. The surprising result: Strong growth without higher prices or inflationary wage hikes.

On Friday, labor figures showed job growth and wages climbing, but at a slower rate. The nation's labor pool continues to shrink. But, still, no inflation.

Mr. Greenspan has grasped the importance of high-tech innovations to the economy. His biggest challenge may be finding ways to measure the impact of these technological changes.

Meanwhile, the Fed could raise interest rates next month. The goal, as it's been since Mr. Greenspan ushered in this boom, is to keep a lid on any inflation.

It's a delicate balancing act that the Fed chairman seems to have perfected.

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