Greenspan? Man of the Year?
Jude Wanniski
December 2, 1998

 

Memo To: Walter Isaacson, Time
From: Jude Wanniski
Re: Man of the Year?

I see in the "Drudge Report" that you are considering Fed Chairman Alan Greenspan as "Man of the Year" for cutting interest rates to save western civilization as we know it. I actually think he is a better choice than the other option Matt Drudge says you are considering a joint Bill/Hillary award. President Clinton really hasn't done anything this year that warrants an award, except get talked about a lot, but he's been in that position before. Greenspan, on the other hand, has been chairman of the Federal Reserve since 1987, and never has been your Man of the Year. We have an annual "Man of the Year" award, which we did give to Greenspan in January 1992, "For prevailing against the forces of darkness all year with help from a guardian (Wayne) Angell."

Greenspan's performance in 1991 was in my opinion his best of all, because he had to wrestle a hostile Treasury Secretary, Nick Brady, who constantly pounded on him to inflate. Greenspan's performance this year, by contrast, has been among his worst. That shouldn't stop you from making him Time's Man of the Year, because even at his worst which I count the way he handled 1996 ~ he still is the most powerful man in the world, given the President's weakened condition. You should know there are quite a few of us who believe Greenspan is the CAUSE of the global monetary deflation and the Asian crisis, by permitting the dollar price of gold the best signal of incipient inflation or deflation to fall to its lowest level in more than 20 years. A year ago, Jack Kemp on "FoxNewsSunday" said Greenspan was at fault in the Asian crisis for failing to meet the demand for dollar liquidity. The crisis in Russia directly flows from the collapse of oil prices, which followed gold down in the Fed's deflation.

If you make Greenspan "Man of the Year," you should at least note that history may not view this as an honor for him. I began warning Greenspan in early 1997 that he was playing with fire by allowing gold to fall below $350. The Asian countries that were tied to the dollar were wrecked by trying to keep pace with our deflation. The reason we avoided some of the problem was the 1997 budget deal, which cut the capital gains tax and set up the supply-side powerhouse known as the Roth IRA. The three-quarter point cuts in the federal funds rate were nice to have, but they did not stop the continued creep of monetary deflation here and throughout the world. If Greenspan suddenly were to announce that he cannot budge commodity prices by lowering the funds rate, and that instead the Fed would add sufficient liquidity to get commodity prices rising with gold in its lead the world then would not have to continue its painful adjustment to the Fed's recent errors. In other words, I do urge you to make Greenspan the Man, but please spare us the saccharine.