Greenspan Debate
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Was Greenspan responsible for the economic boom of the 1990s?
Regina and Amanda:
President Clinton brought the budget deficit under control during the 1990s causing the economic boom of the 1990s.
In addition, there was a powerful wave of corporate restructuring and technological change.
George:
Clintons plan to reduce the deficit was a major factor in the economic boom of the 1990s, but did you know
Greenspan met with President elect Clinton in Little Rock before he took office and they discussed the best way to handle to economy?
Greenspan told Clinton that the best thing for the economy would be low long term interest rates
Greenspan advised Clinton that the bet way to achieve low long term rates would be a deficit reduction
Consequently, Greenspan strongly endorsed Clintons deficit reduction
In addition, Greenspan and the Fed pulled off an economic “soft landing” in the mid 1990s
By increasing the Fed Fund rate by just the right amount at just the right time Greenspan was able to keep inflation low without triggering a recession, allowing the boom to continue
Did Greenspan defeat inflation?
Regina and Amanda
80% of the drop in inflation occurred while Paul Volcker, Greenspans predecessor, was Fed Chairman.
(point to large decrease from 1980 to 1986)
George
True. Volcker broke the back of inflation, but in order to do it he sent the economy into a recession.
Greenspan did something even more amazing; he kept inflation low during the longest economic expansion in US history.
He never had to break the back of inflation because he never let inflation get out of hand in the first place.
(show steadiness of inflation and decrease from 1990 to 1998)
Did Greenspan rescue the economy from the stock market crash in 1987?
George
When Greenspan took office he created crisis management committees including one on the stock market
A couple of months later the stock market crash in a single day in history
Greenspan and Fed credited with saving US economy by providing quickly providing liquidity to banks
FOMC cannot direct banks, but E. Gerald Corrigan, Vice Chairman, called banks to pressure them to make payments
Regina and Amanda
Everyone who has taken Parkmans class knows that the Great Depression was caused by the Feds failure to provide liquidity after a stock market crash, resulting in severely disruptive deflation.
Okay, he provided liquidity to banks…big deal, anyone in this room would have done the same thing, that doesnt make him a hero.
Has Greenspan saved the world from financial crisis?
George