In a speech at the World Business Forum Tuesday, Columbia University economist Jeffrey Sachs had some not very nice things to say about former Fed Chairman Alan Greenspan, calling his monetary policy a "flagrant" and "profound" irresponsibility.
This is certainly a fair, if not overdue critique. But it begs the question: Where was Sachs when Greenspan was actually setting this interest rate policy? If these fiscal moves were such a grave injustice, Sachs surely should have been challenging them, right?
He does not appear to have done so, at least not publicly. But Sachs did opine on Greenspan's fiscal policies back in a 1999 interview with PBS. Recalling the "intense fear ... of a worldwide credit crunch" that gripped world financial markets after the Russian debt default in the summer of 1998, Sachs had the following to say: "the Federal Reserve Board cut interest rates several times and successfully overcame that fear. I think that was important to a good monetary policy."
Indeed, Sachs called for the very same prescription should an economic downturn take hold at some point in the future: "If the whole world went into recession, all the major central banks could cut interest rates and expand the money supply."
When the recession did come, in 2001, and Greenspan did slash rates, one could make the point he was merely following Sachs' recommendation. OK, so maybe Sachs' recent critique of the Greenspan Fed was not that it cut rates in the first place, but more that it kept rates too low for too long. There is admittedly a difference.
Nevertheless, it's very easy to criticize monetary (and other) policies in hindsight. God knows Greenspan deserves it. But it would have been nice to hear this back when he was the "Maestro" and not now that he has become one of the poster boys for the Great Recession. - Nathaniel Baker
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