The Age of Turbulence: Adventures in a New World [Paperback]

 

 

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Greenspan calls 'The Age of Turbulence' a 'psychoanalysis of himself.' It begins (first half) with his early life, describing the events that provided his learning experiences (including his desire to become a baseball player, then a jazz musician), and then goes to his life of implementing those lessons. Undoubtedly the most interesting material included Greenspan's evaluations of the Presidents he had worked with. His observations were not the platitudes one might have expected. 'Nixon was very smart, paranoid,' and was an equal-opportunity disparager of all ethnic groups. Ford was the most normal, and sometimes looked past politics to focus on the ethics of an issue. Reagan's ability to spout seemingless endless one-liners and stories was an 'odd form of intelligence,' according to Greenspan.

Greenspan felt his relationship with Bush I was a disaster, with the President eventually blaming Greenspan for his losing the election to Clinton. Clinton, however, was most like a soul-mate to Greenspan - very intelligent, and one constantly working to soak up knowledge and understanding. Greenspan also labeled Clinton's '93 economic plan that focused on reducing the deficit as an 'act of political courage.' Finally, Greenspan's assessment of Bush II was that he was incurious about the effects of his own economic policy, and that Greenspan's biggest frustration with Bush II was his failure to veto any spending bills. Greenspan was told that Bush thought he could better control Speaker Hastert and Whip Delay by signing the spending bills they, however, were never reticent to spend more money to help assure more Republican congressmen.

Greenspan also added that he disagreed with Bush II's supply-side economic thinking, and that his endorsement of 'A' tax cut during 2001 was just that - not an endorsement of Bush's plan. Another problem was that the plan had no adjustment mechanism in the event assumptions did not pan out and the deficit began to rear up again. On the other hand, Greenspan does not tell the whole story. According to Paul Krugman (New York Times, 9/17/07), he could have clarified himself a few weeks later when he appeared before a Senate committee on the same topic and evaded questions on whether the proposed tax cuts were too large. Two years later when more cuts were proposed, Greenspan did not object, and in 2004 he expressed support for making the Bush cuts permanent - accompanied by cuts in Social Security beneifts that he assured Congress in 2001 would not be threatened by the cuts.

The most incendiary comment in the book was clearly Greenspan's conclusion that the Iraq War II was all about oil. However, Greenspan is now 'clarifying' his statement to Greenspan having told the White House that removing Saddam was 'essential' to secure world oil supplies, and now stating (Washington Post interview, 9/17/07) that securing global oil supplies was 'not the administration's motive.' Greenspan was initially elated when Bush II won, and brought in his old friends Cheney and Rumsfeld. However, he noted that 'they changed,' and that he did not agree with Cheney's 'deficit's don't matter.' There also seemed to be little value placed on rigorous economic policy debate or weighing long-term policy consequences - policy-making was firmly in the hands of White House staff (Rove, et al).

A result was that Bush II's first two Treasury Secretaries (O-Neill, Snow) were essentially powerless. Summarizing, Greenspan saw the Republicans in '04 as having swapped principle for power, ending up with neither, and deserving to lose in '06. The 'good news' was that they did not try to interfere with monetary policy. Greenspan has come under increasing criticism himself for the current housing collapse and preceding bubble. His defense, in 'The Age of Turbulence,' was that the risk of broadening home ownership was worth the risk, that he didn't realize shady practices had grown so prevalent, and had tried raising mortgage rates in '04 and '05 by hiking rates on ten-year Federal notes (no impact). Finally, looking to the future, Greenspan sees a need to raise taxes on energy to encourage conservation, and a risk of increased inflation - already prices are rising in China. As for ethanol, even if all U.S. corn was converted to ethanol, it would only provide less than 20% of our current oil usage!!!

Before reading it, I didn't much like the looks of this book. First of all, it is 531 pages huge. Second, it is written by a banker. Even worse, it really truly is about banking. High level bank governance over the world's largest economy, mind you, but banking nonetheless.

In spite of these undeniable negatives, I cracked it open and I was thankful I did. It undeniably merits the buzz it has generated.

Alan Greenspan is the former Chairman of the United States'Federal Reserve Board; the independent body that governs the money supply of the United States and indirectly the value of the American dollar, the world's reserve currency. He held that crucial position from 1987, when he was appointed by President Reagan, until last year, when he retired. In that position, he oversaw the American financial system as it completed one of the longest and most successful economic expansions in recent memory.

So successful was his service as Chairman and so significant was his gravitas, that there grew an entire mini-industry of Greenspan-watching. This was carried to the extreme where CNBC regularly broadcast live feed of Greenspan and his briefcase as he arrived at meetings of the Federal Reserve Board. The premise was that a full briefcase meant a rate hike. Greenspan responds in this book that it usually meant he packed his lunch.

It is difficult for those of us who have come of age in our era of balanced budgets and low interest rates to understand that the current situation is the exception, not the rule. Much of the financial history of the 20th Century is the story of how central bankers and governments struggled with inflation and deficits since abandoning the gold standard in the 1930s. For Greenspan, however, this struggle was the story of his career. Indeed, Greenspan spends significant portions of the book decrying the "populism" and Keynesianism that led to stagflation in the 1970s and 20 percent interest rates in the early 1980s.

While the memoir of Greenspan's time as Chairman constitute the meat of the book, it is also the best known and the least remarkable part of the book. Since Greenspan has been Chairman for most of my adult life, his early life story as a young economist, libertarian activist and acolyte of Ayn Rand was perhaps the most surprising to me. Rand actually nicknamed the young Greenspan "The Undertaker" for his dour demeanor during their weekly gatherings of like-minded intellectuals in New York City of the 1950s.

While Greenspan made a career of astute economic analysis, he was also a political activist with Conservatives in the Republican Party and served under President Richard Nixon. He was an important member of the Gerald Ford administration, where he served as the Chair of the Council of Economic Advisors. It was his Republican credentials and his time in the Ford Administration that earned him the confidence of the Reagan administration which appointed him to the powerful and fully independent position of Chairman of the Federal Reserve Board.

The most compelling and surprising part of the book, however, is in the final chapters where Greenspan, freed from the constraints and restrictions of having the markets hinge on his every word as Chairman of the Fed, prognosticates about current economic trends he sees developing in the American and world economy. Greenspan made his early career developing economic forecasts, and his skill clearly shows in this section. Of particular interest are the sections where he identifies one of the constraints on future growth as the inadequate education system in the United States and its skilled labour shortage. Clearly there is a lot here that applies directly to Canada as well.

"The Age of Turbulence" is part biography and part economic treatise. In the first part, Greenspan tells the saga of his youth, education and gradual professional development. The narrative of his relationships with Ayn Rand, Arthur Burns and others introduces the reader to the concept of how a familiarity with innovative thinkers can direct a life and career. As a business major in college, I find the story of the life work of an economist to be fascinating. A reader with less interest in business may find it to be boring. Greenspan then progresses into the memoirs of his service on the Council of Economic Advisors and as Chairman of the Federal Reserve Board. As an amateur historian, I became engrossed in his memories of service with presidents from Nixon to George W. Bush. His intimate analysis of them, including his characterization of Nixon and Clinton as the smartest with whom he worked, is instructive. His narratives on recent history from an economic viewpoint present the issues with which we have lived in a unique perspective. His discrete stories about his relationships with his mother and wife, Andrea Mitchell, keep the work grounded in real life.

The latter parts of the book consist of Greenspan's views on the economic conditions and prospects in nations and regions of the world followed by his analyses of anticipated opportunities and challenges expected to confront the U.S. economy in the foreseeable future.

This book is well written. The biographical portions will be fascinating to anyone with an interest in recent national and economic history. This section may justify the purchase in itself. Elements of the later sections dealing with economics will require a greater than common understanding of economic theory and methods to keep the eyes from glazing over. Even if you do not finish the book, the early portions will make the effort worthwhile.

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5.0 out of 5 stars Greenspan the intellectual
Greenspan's story is far more interesting than ever I thought it would be. In a word: FASCINATING.

An extremely well written book, by an extremely intelligent... Read more

Published 16 months ago by Steve Pozgaj

4.0 out of 5 stars Half biography, half policy recommendation, all Greenspan
A must-read for anyone who followed the markets under the Greenspan Fed.

Although he isn't very tough on himself, and never mentions "Greenspeak" (instead referring to... Read more

Published on April 10 2010 by Trevor G. Stack

5.0 out of 5 stars Chalk full of interesting revelations.
Although there seems to be much controversy aimed at Mr. Greenspan, due to the current state of the US financial crisis, I found this book quite fascinating. Read more

Published on Mar 10 2009 by James DiCenzo

4.0 out of 5 stars A Broad View on the Economy
When I started listening to the CD version of "Age of Turbulence" I expected to learn some incredible things from one of the legendary great economic minds of all times. Read more

Published on Aug 22 2008 by Ian Gordon Malcomson

4.0 out of 5 stars A Generalized Whitewash of Monetary Policy in the Modern Era
While I started to read "Age of Turbulence" with the expectation of learning what makes Greenspan tick as one of the great economic minds of the times, I came away with a less... Read more

Published on July 27 2008 by Ian Gordon Malcomson

2.0 out of 5 stars It is an old fashioned view on the economy
This book is a mixture of economic and political history of the past in the United States of America. The political view begins with his beginning in the Ford Administration. Read more

Published on Jan 18 2008 by Bernd Kotz

4.0 out of 5 stars Great read
This is a great read even if you are not a student of economics. Greenspan writes in a manner that is easy to follow, while allowing the reader to learn about economic policy... Read more

Published on Dec 26 2007 by Burgess K. Dastur

5.0 out of 5 stars An Economic Masterpiece!
"Creative destruction" for other economic writers... in general terms a friendly book that goes from Greenspan's early years to a bold forecast of how the economic world will look... Read more

Published on Dec 4 2007 by Othon Leon

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