The article, “Greenspan gets another Fed term,” in the New York Times discussed Alan Greenspan’s success and failures during his term. The article was fairly easy reading. I found some statements to be quite amusing however, there were some issues discussed that was a little ambiguous.
Reading this article, I learned that President Clinton nominated Alan Greenspan to a fourth term as chairman of the nation’s central bank. I had no clue as to what the title of chairman of the nation’s central bank did. However, after reading this article, I had some ideas as to what role chairman of the nation’s central bank plays. Alan Greenspan makes decisions in the S & P, NASDAQ, and DOW Jones markets. Alan Greenspan also approves interest rates, evaluate US currency against all other countries, makes sure the value of the dollar is at the best interest of the economy, decides on economic policies, and among many other things that I have yet to learn.
The third paragraph into the article talks about fear of rising interest rates will negatively affect corporate profits. I do not understand how rising interest rates will negatively affect corporate profits. One guess might be due to the increase in interest rates, the percentage earned on stocks will decrease. This to me means that the taxes on the stocks will increase. Stockholders will have to pay more taxes on their stocks. Stockholders will not like this, therefore they will end up selling their stocks. This will negatively affect corporate profits.
The article mentioned, “Greenspan this year rank among the most formidable he has had to meet over his tenure at the Fe. Although he is adored at the moment, all of his fine work could be forgotten if he is unable to walk the tightrope of maintaining economic growth while keeping inflation low,” sounds very threatening. It sounds like Greenspan better not screw up or else all his success, hard work, and accomplishments will be well forgotten. In a sense, it is true. Once Alan Greenspan makes a wrong turn, all hell will break loose and no-one will give him the benefit of the doubt. I found this statement real amusing.
“Clearly, the economy is strong and the financial markets have been exceedingly robust. But the pace that both the economy and the market are moving in are not sustainable long-term,” is another statement I found quite amusing, but at the same time a little troubling. My question is, does this statement boil down to the cliche, “too much of a good thing is too good to be true.”? The economy and financial markets are at the best it has ever been, which means a downfall is somewhere in the future.
One paragraph mentioned that the Fed is “expected to raise the bench mark federal funds rate, currently at 5.5%, by one quarter of one percentage point in what would be its fourth interest rate increase since June 1999.” I was really confused with the content of this statement. I found the wording really hard to comprehend. Finally, I figured out that what this statement was really trying to say is that interest rate is currently at 5.5%. Interest rate is expected to rise one quarter of one percentage point. This rise in interest rate will be the fourth time that it has risen.
The article basically reviews Alan Greenspan’s work. There were ups and downs throughout Alan Greenspan’s term. The article mentioned when Alan Greenspan took command of the Fed, the stock market crashed. However, Alan Greenspan saved his reputation by flooding the banking system with funds, making sure that credit was readily available to everyone who needed it. This prevented the economy from going into a recession. Alan Greenspan recovered the recession in the early 1990” and was recognized for that. Although there were some downfall during Alan Greenspan’s term, but he cleared them up quickly and has done many great things for the economy.