Federal Reserve Chairman Alan Greenspan is truly some sort of wizard — or at least he has the power to cloud men’s minds. First, early in the 1990s, he cited irrational exuberance in referring to the boom-in-progress. Things were, he strongly implied, more than a little out of control.
But a few years later, after the economy demonstrably got futher out of control, he changed his mind; he defended the markets and said that the then-exuberance seemed, well, rational. Now, however, Greenspan has done a rhetorical backflip-straddle with half-twist (Degree of Difficulty: 5.6): in a speech at the American Economics Association conference here in San Diego he tried to have it all ways at once:
“There appears to be enough evidence, at least tentatively, to conclude that our strategy of addressing the bubble’s consequences rather than the bubble itself has been successful.”
In other words, the bubble that wasn’t a bubble was successfully handled by Fed policies that weren’t intended for a bubble because there wasn’t one. Ah, the life of a central banker.
[Update] In case anyone’s interested in reading Greenspan’s speech directly, it’s at this link. Other Fed speeches from the AEA conference this weekend can be found here, including the dollar-moving comments by Ben Bernanke.