“Mumbling With Great Incoherence”
The great man has died. The all-knowing, all-powerful, and second longest tenured chair of the Federal Reserve has left this earthly plane, presumably to preside over God’s vast holdings and riches.
Part of what made Alan Greenspan perfect for the time he reigned (1987–2006) was his ability to, as he put it, master the art of “mumbling with great incoherence.” To the outside world, the “Maestro,” as he was known in The Beltway, Greenspan was the money whisperer. His judgment was never to be questioned. The bottom rung of the economic ladder was never counted against him so long as the gains at the top continued to grow unabated.
In addition to ushering in what many believed to be an era of prosperity, Greenspan ushered in an era of extreme secrecy at the Fed. His methods were not to be questioned, and he displayed very little patience for those who summoned him to testify on the Hill. He was no mere mortal and reviled being treated as such; thus the self-described tactic of mumbling incoherently. Why bother explaining things to the commoners?
But Greenspan wasn’t as much responsible for the wealth gains during his tenure as he was the reputational beneficiary of them. As Jeanna Smialek writes in her Fed book Limitless, “Greenspan’s cult of personality owed in part to the era he oversaw. He had been dealt a winning economic hand by history, presiding at a time of globalization hypercharged by a relatively young working-age population and big advances in computer technology, one in which laissez-faire economics and animal spirits were celebrated as engines of prosperity.”
Before Greenspan ever set foot inside the Federal Reserve, he spent years cultivating a very particular intellectual identity. He was a card-carrying disciple of Ayn Rand, a fixture in her inner circle of objectivists, absorbing the gospel that markets were self-correcting, that regulation was coercion, and that government interference in economic life was a moral failing. This was a man who genuinely believed the Federal Reserve—the very institution he would one day lead—was a philosophical abomination. The central bank, in the objectivist worldview, was the embodiment of everything wrong with statist interference. And yet, ambition has a way of softening one’s philosophical commitments.
What greased the skids for Greenspan’s entry into the corridors of power was a piece of work so cynically brilliant it almost demands admiration. In 1983, Ronald Reagan needed to shore up Social Security, as the program was hemorrhaging cash, but he could not be seen raising taxes. His entire political brand was built on the promise that taxes would go down, full stop. So Reagan commissioned a fix.
Enter Greenspan, who chaired the National Commission on Social Security Reform and engineered what can only be described as the perfect Washington parlor trick: raise payroll taxes dramatically on working Americans by increasing the Social Security deduction, while leaving the income cap in place. The wealthy would pay the same flat amount they always had. The burden fell squarely on the middle and working class. It was, in every functional sense, the largest tax increase in American history—packaged and sold as a solvency fix. No one called it a tax hike. Greenspan had his ticket punched.
For a man who professed to despise government, he proved remarkably comfortable inside it. He navigated Washington with the ease of a born insider, schmoozing, testifying, advising—the very definition of a Beltway gadfly—all while maintaining the posture of the reluctant technocrat called to serve. The Federal Reserve chairmanship, when it came in 1987, was the logical culmination of a decades-long project of making himself indispensable to the powerful.
For nearly two decades, it worked. The economy hummed, at least for the upper half of it. The markets rose. Greenspan spoke in riddles and the world leaned in to decode him. But beneath the surface, something was rotting. Throughout the early 2000s, as the housing bubble inflated to grotesque proportions, Greenspan actively encouraged American households to take on more debt: floating-rate mortgages, home equity lines of credit, adjustable-rate instruments that looked cheap in the short-term and became punishing traps when rates moved.
And rates did move. Because he fucking moved them. Greenspan raised the federal funds rate 17 consecutive times between 2004 and 2006. The households he had encouraged to stretch were now being slowly strangled by the same instrument he controlled. The over-leveraging of the American middle class was not an accident of markets. It had a facilitator.
Then came 2008. The whole architecture collapsed. And Greenspan sat before Congress and delivered what should have been a moment of reckoning. He admitted, with characteristic understatement, that he had “found a flaw” in his ideology. He had not accounted, he said, for the degree to which self-interest on Wall Street could be destructive rather than corrective. The market, it turned out, did not always know best. The lifetime of intellectual scaffolding he had constructed—the Randian framework, the objectivist faith in rational actors, the contempt for oversight—had a hole in it big enough to drive the global financial system through.
What followed was not contrition. It was a book. The Map and the Territory, published in 2013, offered Greenspan’s retrospective account of his career and the crisis. It gestured at uncertainty. It updated some models. It did not apologize. Rather, it suggested that more psychological and behavioral frameworks should be adopted instead of relying strictly on math and models. Not his behavior, or that of the political elite who would starve the masses to enrich the few. Everyone else’s “herd mentality.” That was the problem.
The Maestro had played a wrong note. Instead of admitting it, he simply rewrote the score. |
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