According to Peter Hartcher, from 1996 on, Alan Greenspan, chairman of the United States Federal Reserve Board from 1987 till 2006, knew that equity markets were overheated and should have taken concerted action to cool them. In fact, Greenspan gave one speech in December 1996 questioning the "irrational exuberance" of investors but never followed up to pop the bubble.
By 1999, Greenspan had become an out-and-out cheerleader of the so-called New Economy, in which labor productivity was rising so quickly that inflationary pressures were of minimal concern. As the steward of America's financial markets, he should have known better, Hartcher argues, but in the face of jawboning from both Congress and the White House, Greenspan buckled under and took the easy way out.
Peter Hartcher is an Australian journalist and the Political and International Editor of the Sydney Morning Herald.
He is also Chair Editor of The Diplomat, an Australian foreign affairs journal, and a visiting fellow at the Lowy Institute for International Politics in Sydney.
Gerard Henderson is an Australian newspaper columnist for The Sydney Morning Herald and The West Australian. He is also Executive Director of the Sydney Institute, a privately funded current affairs forum.