Greenspan Debate
Essay by 24 • December 12, 2010 • 695 Words (3 Pages) • 1,270 Views
Was Greenspan responsible for the economic boom of the 1990's?
Regina and Amanda:
No.
* President Clinton brought the budget deficit under control during the 1990's causing the economic boom of the 1990's.
* In addition, there was a powerful wave of corporate restructuring and technological change.
George:
Yes.
* Clinton's plan to reduce the deficit was a major factor in the economic boom of the 1990's, but did you know...
o Greenspan met with President elect Clinton in Little Rock before he took office and they discussed the best way to handle to economy?
 Greenspan told Clinton that the best thing for the economy would be low long term interest rates
 Greenspan advised Clinton that the bet way to achieve low long term rates would be a deficit reduction
 Consequently, Greenspan strongly endorsed Clinton's deficit reduction
* In addition, Greenspan and the Fed pulled off an economic "soft landing" in the mid 1990's
o By increasing the Fed Fund rate by just the right amount at just the right time Greenspan was able to keep inflation low without triggering a recession, allowing the boom to continue
Did Greenspan defeat inflation?
Regina and Amanda
No.
 80% of the drop in inflation occurred while Paul Volcker, Greenspan's predecessor, was Fed Chairman.
 (point to large decrease from 1980 to 1986)
George
* True. Volcker broke the back of inflation, but in order to do it he sent the economy into a recession.
* Greenspan did something even more amazing; he kept inflation low during the longest economic expansion in US history.
o He never had to break the back of inflation because he never let inflation get out of hand in the first place.
* (show steadiness of inflation and decrease from 1990 to 1998)
Did Greenspan rescue the economy from the stock market crash in 1987?
George
* When Greenspan took office he created crisis management committees including one on the stock market
* A couple of months later the stock market crash in a single day in history
* Greenspan and Fed credited with saving US economy by providing quickly providing liquidity to banks
o FOMC cannot direct banks, but E. Gerald Corrigan, Vice Chairman, called banks to pressure them to make payments
Regina and Amanda
* Everyone who has taken Parkman's class knows that the Great Depression was caused by the Fed's failure to provide liquidity after a stock market crash, resulting in severely disruptive deflation.
* Okay, he provided liquidity to banks...big deal, anyone in this room would have done the same thing, that doesn't make him a hero.
Has Greenspan saved the world from financial crisis?
George
Yes.
* He
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