The Greenspan Effect: Words That Move the World's Markets

by Sicilia, David B.; Cruikshank, Jeffrey L.

• ISBN13: 9780071349192
• ISBN10: 0071349197
• Format: Hardcover
• Copyright: 1999-09-01
• Publisher: McGraw-Hill

Summary

The United States Federal Reserve System has played a key role in U.S. economic affairs since it was established in 1913. Still, it has never enjoyed the unprecedented power and influence it wields today over global financial markets. The reason? Alan Greenspan. Greenspan first gained attention when he stopped the 1987 market crash in its tracks, propelling the U.S. economy into its longest period of uninterrupted growth in history. But it was in a speech the evening of December 5, 1996, when Greenspan's words truly revealed their unprecedented powers. When his seemingly innocuous comment about the sky-high stock markets--"How do we know when irrational exuberance has unduly escalated asset values?"--hit global wires, world markets immediately plunged as much as five percent. The next morning, with Greenspan's warning on every New York trader's lips, the Dow immediately dropped two percent. To reeling traders, the dollar value of understanding Greenspan--and the instantaneous effect his speeches would have on markets--became clear. THE GREENSPAN EFFECT recalls these and other Greenspan episodes in the most honest, dependable words available--Greenspan's own. Excerpts of his speeches from 1987 to the present are followed by expert analyses of those speeches, and nuts-and-bolts reporting on global financial reactions. This up-close examination of Alan Greenspan's tumultuous regime discusses his early career, and how he developed the bottom-up analytical approach that is today his hallmark at the Fed. It shows how, unlike the politicians who appoint him, Greenspan has never allowed political distractions or personal foibles to interrupt his chosen course. By focusing on Alan Greenspan's public pronouncements as Fed chairman, THE GREENSPAN EFFECT provides a concise, accurate distillation of Greenspan's thinking on today's most important economic topics. It presents an historic, solidly researched overview of how these pronouncements have affected Wall Street and other world financial markets. In so doing, this immensely valuable profile equips investors and businesspeople with today's most important tool--an analysis of how Alan Greenspan has responded in past economic environments, what he is likely to do in the future, and how financial markets will react.

Author Biography

David B. Sicilia, Ph.D, is an experienced consultant, business historian, and author. He has received numerous awards and fellowships, including the Charles Warren Fellowship from Harvard University and a Sloan Foundation grant for his work on stakeholder theory. Dr. Sicilia is the author or coauthor of numerous influential books, including The Engine That Could: Seventy-Five Years of Value-Driven Changes at Cummins Engine Company and The Entrepreneurs: An American Adventure. Jeffrey L. Cruikshank is a cofounder of Kohn-Cruikshank, Inc., a Boston-based communications consulting firm. He has written or cowritten a number of business-related books, including the bestselling Do Lunch or Be Lunch, and was a coauthor with David Sicilia of The Little Engine That Could.

Table of Contents

Part I: Greenspan, The Fed, and The Stock Market.

The Fed Chairman as World Celebrity.

The Fed's Levers of Power.

Part II: Words That Lift Markets.

The "Exceptional" Economy.

The "Oasis of Prosperity."

The "Salutary" Sell-Off.

The Wealth Effect.

Part II: Words That Sink Markets.

"Irrational Exuberance" in the Stock Markets.

Battling Inflation.

Tight Labor Markets.

Financial Contagion.

Part IV: Remaking Financial Institutions.

Reforming Social Security.

Merging Commercial and Investment Banking.

Reforming Federal Deposit Insurance.

Derivatives.

Part V: World Crisis Manager.

The Asian Crisis.

The Crash of '87.

The Gulf War.

Part VI: Competing in the Global Economy.

U.S. International Competitiveness.

Foreign Investment in the U.S.

Economic Reform in Russia and Eastern Europe.

The Virtues of Capitalism.

Part VII: Critical Investments.

The American Education System.

Consumer Saving, Credit, and Retirement.

Corporate Restructuring.

Income Inequality.

Small Business Finance.

The Farm Economy.

Mortgage Finance.

The Federal Budget Deficit.

Part VIII: Greenspan Looks Toward the 21st Century.

The "New" Economy.

The Future of the Federal Reserve.

The Future of the Banking System.

The Future of the Financial Services.

Technology and the Future.

Part IX: The Investor's Roadmap to Greenspan.

Explaining the Greenspan Effect.

The Game of Deciphering Greenspan.

What Matters--and Doesn't--When the Chairman Speaks.

Greenspan and the Future of the Stock Market.