In His Own Words - Greenspan Over The Years
Saturday 10 October 1998
"I know you believe you understand what you think I said, but I am not sure you realise that what you heard is not what I meant." - Perhaps the best example in recent history of the obfuscatory language of central bankers, referring to frequent market misinterpretation of his words
"How do we know when irrational exuberance has unduly escalated asset values, which then become subject to unexpected and prolonged contractions, as they have in Japan over the past decade?" - Said in December 1996, prompting a 170-point drop in the FTSE and 140-point fall in the Dow. The market jitters proved to be a one-day wonder, however, and stock indices continued their relentless upward climb
"That was not what I was intending to do at all. These are very elaborate international markets which are driven by decisions of millions of people. No one can affect them in a fundamental way." - March 1997, during a grilling by Congress about his December "irrational exuberance" remark. Mr Greenspan was asked why he kept talking the US stock market down
"A driver may tap the brakes to make sure not to be hit by a truck coming down the street, even if he thinks the chances of such an event are relatively low." - July 1997, in reference to the need to be always on the look-out for inflation. The speech as a whole was taken by the market to mean further US interest rate hikes were some way off. The Dow closed above 8,000 at a then record 8,061.65
"It clearly would be unrealistic to look for a continuation of market gains of anything like the magnitude of those recorded in the past couple of years." - Early October 1997, close to the 10th anniversary of the stock market crash and just before a round of market jitters which saw the FTSE lose 11 per cent of its value in just one month
"Provided the decline in financial markets does not cumulate, it is quite conceivable that a few years hence we will look back at this episode, as we now look back at the 1987 crash, as a salutary event in terms of its implication for the macro-economy." - The end of October 1997, in response to stock market falls. Prompted little market reaction that day, although US and UK stocks staged a mini- recovery soon after
"History is strewn with periodic contractions of significant dimensions and I have no doubt, human nature being what it is, that it is going to happen again and again." - Said a few days after the FTSE hit its all- time high of 6,183. The index fell to below 6,000 after this remark, and is now languishing some 23 per cent off its peak levels of July
"I do think that we have to bring the existing instability to a level of stability reasonably shortly to prevent the contagion from really spilling over and creating some very significant kinds of problems for all of us. I think we know where we have to go." - September 1998, and widely taken as meaning that a US rate cut was on its way. Mr Greenspan duly obliged and cut rates by 0.25 points, but the markets, which hoped for at least a half-point, were disappointed
"We are clearly facing a set of forces that should be dampening demand going forward to an unknown extent. This is a time for monetary policy to be especially alert." - Said earlier this week, and widely taken as a heavy hint that another US rate cut was on its way, although this remark has, to date, had little effect on the financial markets
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