BuzzCharts, not wanting to buck the trend toward grade inflation, has decided to grade our Fed chairman on a curve. By this standard, Alan Greenspan has done well. The above chart presents fluctuations in the CRB Spot Index (after a recent purchase, the Reuters CRB Spot Index), which tracks fluctuations in commodity prices. Interspersed throughout the chart are the names of the men who chaired the Federal Reserve during the time spans in question, allowing the chart to show how much prices fluctuated during the tenure of each Fed chairman since 1947.
Next, BuzzCharts looked at price levels before and after the term of each chairman. Did the price level rise or fall and by how much on an average annual basis? Price levels under G. William Miller (and President Carter), increased 38.31 on average; under Greenspan’s mentor Arthur Burns, prices rose 12.96 per year. Somebody had to put an end to all this inflation, and that someone was Paul Volcker, who drove the prices back down an average of -3.36 per year, and then handed the keys to the money machine to Alan Greenspan who left the price level a mere -0.42 lower than when he arrived.
This means that the dollar is worth now very close to what it was worth when Greenspan was first appointed Fed chief in 1987. This does not tell the entire story: As the above graph shows, there was a fair amount of fluctuation upwards and downwards during his term. There’s the flood of liquidity in response to the LTCM crisis, the corresponding sopping up of that liquidity, the accommodative monetary policy of the late 1990s, and finally Greenspan’s attempt to tamp down “irrational exuberance” by using the severe deflationary policy that landed us in the recession of 2001. Still, it seems clear that when Greenspan deflates, he has the sense to reflate afterwards.
Finally, BuzzCharts looks back wistfully at the golden years before 1973 when Nixon took the United States off the gold standard. That was a time when price stability could be taken for granted.
— Jerry Bowyer is a talk show host on WPTT radio in Pittsburgh, Pennsylvania. He can be reached through www.BowyerMedia.com.