Expert View : One Alan Greenspan, there's only one Alan Greenspan

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The Independent Online

Greenspan is the bankers' darling. This weekend he is being feted by his peers at Jackson Hole, Wyoming. Declining risk premiums are attributed to the "Greenspan put" - the certainty that his astute monetary management will avoid slip-ups. His popularity has broader appeal as well; when he appeared before the senate finance committee recently, one hot-headed senator began inanely shouting: "Five more years!", while at a Washington baseball game this summer the crowd chanted: "Keep 'em low, Al."

Can't quite imagine that happening to Mervyn King on the terraces at Aston Villa.

King once opined that a good central banker should be a "mathematician, historian, statesman and philosopher". Greenspan achieves this: first an academic economist, he went on to conquer Wall Street with his own consulting firm. He served on no less than eight different companies' boards, and, in the political sphere, was chairman of president Gerald Ford's Council of Economic Advisers, and Ronald Reagan's Commission on Social Security Reform.

Most of all, he will be remembered for extraordinary crisis management. In his first few months in office, he was confronted by the crash of 1987, and immediately cut interest rates (against economists' advice). Nor was he afraid to pump money into the system after the Asian crisis of 1998 and the 11 September attacks. All this from an inflation hawk.

Although originally an academic, Greenspan showed flexibility in policy and a quite extraordinary willingness to take data from many "off-piste" sources. This perhaps explains his greatest achievement, the adjustment of economic models to accommodate the paradigm shift of the 1990s - the "productivity miracle".

But he has not been without his faults. His Republican laissez-faire has perhaps been too close to the surface. He refused to remove the "punch bowl from the party" of the 1990s. His condemnation of "irrational exuberance" was a words-only broadside at the technology bubble, delivered way too early, in 1996.

Republicanism is one element of his successor's CV we can be sure of. The search to fill those big shoes is being led by that cross-party liberal, Dick Cheney. I braved a tropical Washington a few weeks ago to catch up on the gossip. Three names crop up.

The most distinguished shortlister is "Marty" Feldstein, a Harvard professor known as "the father of supply-side economics". He was once close to Reagan but hasn't held a public post since. One of his ex-pupils, Glenn Hubbard, a manic tax-cutter, is said to be much closer to George Bush, though, at 47, he could almost be Greenspan's grandson. The third candidate, and front-runner, is Ben Bernanke, once called a "talented and visionary thinker" by Bush.

No one candidate is certain, but one thing is clear: as far as the markets are concerned, the watchword is continuity. This is perhaps why Bernanke is favoured as most closely associated with the policy of "goldilocks economics".

Changes are likely to be ones of emphasis. Tax cuts will probably be more warmly embraced. There may be a movement towards the Bank of England's more collective approach. US economists were amazed to hear that King had recently allowed an interest change against his own views.

But whatever the criticisms, Greenspan has achieved much. His assessment of his legacy is characteristically understated: "The US economy has remained on a firm footing, and inflation continues to be well contained ... the prospects are favourable for a continuation of those trends." We'll miss you, Al.

christopher.walker@tiscali.co.uk

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