One of the bubbles that has yet to be broken is the esteem in which Americans hold our Federal Reserve chairman, Alan Greenspan. “His mumbles about the mysteries of finance have brought comfort to many,” writes Grant’s Interest Rate Observer. As Grant’s notes, at the height of the bull market, 50 percent of Americans had a favorable view of Mr. Greenspan. In July, in the midst of the market’s turmoil and decline, 62 percent of Americans had a favorable opinion of our C.E.O. central banker.
Now that he is about to become Sir Alan, perhaps it’s unpatriotic to pick on Mr. Greenspan. But his actions in the past few years are so egregious that one wonders if he ever had any real ability. He continues to mouth productivity gains; in fact, that has been his spin from Day 1. Well, like many dot-coms who had to revise their earnings, U.S. productivity gains of the past few years are now being revised downward by nearly 50 percent. In the almost 20 years of unparalleled surging equity markets, earnings gains by corporations and huge inflows of capital from every corner of the globe, even Mickey Mouse would have looked like some kind of genius. Among Mr. Greenspan’s lapses in judgment cited by Grant’s were: his refusal to intervene and prick the bubble-a bubble which he should have known would have a huge cost on the U.S. economy; his intervention on stock declines, but no action on stock prices on the upside as they reached absurd historical levels; and his not at all seeing the obvious signs of excessive productive capacity and indebtedness. And if he saw anything, he did nothing about it. Indeed, as Grant’s commented, isn’t it extraordinary that Mr. Greenspan didn’t think it odd that “companies with no revenues commanded multibillion-dollar stock-market capitalizations.”
Mr. Greenspan has recently attempted to defend his position, saying that any rate increases in the past five years would have devastated the economy. Is it possible that Mr. Greenspan is not aware of margin requirements and money supply, two of the Fed’s most powerful weapons? A tightening of each would have dampened the stock-price speculation bubble and cooled off the ridiculous lending practices of the nation’s bankers. The unfortunate truth about Alan Greenspan is that he is just another confused bureaucrat in a business suit desperately trying to hold on to his job.
Now, besides a rudderless central bank, we Americans have a clueless administration which believes that tax cuts and the ouster of Saddam Hussein will lead us to the Holy Grail, and a Treasury Secretary who, it appears, doesn’t even read The Wall Street Journal .
What’s the solution? If Mr. Greenspan does today what he should have done five years ago, the economy could spiral down into a financial debacle from which it would take years to recoup. Doing nothing, however, could be disastrous. Any attempt to revitalize financial markets with additional credit might lead to an inflationary cycle of dramatic proportions. Changes by the Fed at this time must be subtle and gradual, and it should be noted that inflation is more of a threat than recession.
A new chairman might help.
City Council Hosts a Thug
New Yorkers might reasonably assume that the elected members of the City Council would express some indignation if a violent, repressive political leader with a sickening record of human-rights abuses paid a self-serving visit to the City Council chambers in City Hall. But that is precisely what happened one week ago, when Robert Mugabe, the tyrannical president of Zimbabwe, turned up-not uninvited, but as the special guest of Brooklyn City Councilman Charles Barron and members of the Black and Hispanic Caucus. While behavior of this sort is not surprising from the disgraceful Mr. Barron-a former Black Panther who indulges in cynical racial politics at every opportunity-it is deeply troubling that the 50 other members of the City Council, including Speaker Gifford Miller, have chosen appeasement over outrage in the wake of Mr. Mugabe’s appearance. Where is the leadership? Mr. Miller and the Council should be ashamed of themselves.
Fearful of opposing Mr. Barron and being labeled racist, not a single council member has had the courage to make a strong statement condemning Mr. Mugabe, a man who uses his power as head of state to starve his people, and brutalize and kill white farmers, while damaging his nation’s agricultural industries. As Joyce Purnick reported in The New York Times , Amnesty International and Human Rights Watch have documented the Mugabe regime’s policies, which include “torture and detention, repression of judicial independence and journalistic freedom, the intimidation of political opponents,” as well as a “violent and disastrous” policy of seizing white-owned land. There have also been reports that scores of women-many as young as 12-have been raped and had their genitals burned by Mr. Mugabe’s forces, as punishment for their families’ not supporting Mr. Mugabe.
Inviting a proven war criminal dressed in a Sergeant Pepper costume to the City Hall of New York is an affront to all people, black and white. It is disturbing that City Council members have been cowed by their colleague, Mr. Barron-a man who has said that he sometimes wants to go up to a white person and “slap him just for my mental health.” Apparently, Speaker Miller and the rest of the City Council are content to allow tawdry racial politics and knee-jerk political correctness to win out over common sense and human decency. What’s next-engraved invitations to Slobodan Milosevic and Saddam Hussein?
Where does intuition-that gut feeling you get about someone or something-come from? Neuroscientists are concluding that we all possess an unconscious mind which is at times more intelligent than our conscious mind, and which helps us size up people’s motives and character. In a recent interview with The Wall Street Journal , a University of Virginia psychology professor named Timothy Wilson described this newfound unconscious as “mental processes that are inaccessible to consciousness but that influence judgments, feelings or behavior.” The Journal distinguishes this from Freud’s concept of the unconscious, and reports that this “adaptive” unconscious “processes data, sets goals, judges people, detects danger, formulates stereotypes and infers causes, all outside our conscious awareness.”
Researchers conducted experiments proving that our adaptive unconscious can figure things out-such as how to avoid risk in a given situation-even though we may experience deep confusion at the time. Why does all this inner computing occur outside our awareness? Because we’ve got enough on our conscious plates as it is, and so, the brain handles a lot of information without letting us know it is doing so. The bad news is, research indicates our adaptive unconscious may come with its own troublesome personality. But the researchers aren’t sure yet-it’s just a gut feeling.