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The Greenspan Effect

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The Greenspan Effect

Words That Move the World's Markets

McGraw-Hill,

15 min read
10 take-aways
Audio & text

What's inside?

When your economic survival depends on one man’s decisions, you’d better understand that man: How Alan Greenspan’s ideas and actions affect U.S. markets and your financial future (or... understanding the 500-pound gorilla).

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Editorial Rating

5

Qualities

  • Overview
  • Background

Recommendation

David B. Sicilia and Jeffrey L. Cruikshank study how U.S. Federal Reserve Bank chairman Alan Greenspan interprets market forces. They explore how Greenspan’s thoughts and actions affect markets. Knowing Greenspan’s impact can be useful if you want to capitalize on market movements. The book examines the meaning – for investors – of Greenspan’s relationship with the markets. Along the way, the reader gets a whirlwind tour of the U.S. and world economies. The take-home message repeated again and again – Greenspan and interest rates can move markets – is something savvy investors might already know. getAbstract recommends this book to any investor who wants to understand the world economy better and to those who are interested, as investors or observers, in Greenspan’s impact on the markets.

Summary

Greenspan’s Early Life

Alan Greenspan was born in 1926 in New York City. The son of a stock broker, he studied music at Julliard and then economics at New York University and Columbia. He was influenced by prominent economist Arthur Burns, head of the Federal Reserve Bank from 1970-1978, and by writer-philosopher Ayn Rand’s ideas about "purified" capitalism. In 1954, he formed the economic consulting firm Townsend and Greenspan, and prospered in the private sector.

Greenspan headed the Council of Economic Advisers during the Ford administration. In 1987, he replaced Paul Volcker as chairman of the Federal Reserve Bank. His first crisis as Fed chairman was "Black Monday," the October 19, 1987, stock market crash, when the market lost 508 points, or 22.6 percent, of its value. Greenspan, who immediately provided decisive leadership, announced, "The Federal Reserve, consistent with its responsibilities as the nation’s central banker, affirmed today its readiness to serve as a source of liquidity to support the economic and financial system."

He cut interest rates, and the markets stabilized. In the months following the crash, he boosted interest rates to reduce ...

About the Authors

David B. Sicilia, Ph.D., is a business historian, consultant, and author. He is the author or co-author of many books including The Engine That Could: Seventy-Five Years of Value-Driven Changes at Cummins Engine Company and The Entrepreneurs: An American Adventure. Jeffrey L. Cruikshank is the author of many business books, including the best-selling Do Lunch or Be Lunch. He is a co-founder of Kohn-Cruikshank, Inc., a communications consulting firm in Boston. Sicilia and Cruikshank previously collaborated on The Engine That Could.

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