Then again, it has always been unclear to me what causes the daily ups-and-downs in the market. Sometimes it seems that random events have great sway over our financial security (“Train Crash in Rangoon Kills 4,000; Dow Soars”).
So with my stunted financial background (full disclosure: I’m still heavily invested in Six-Day War bonds), Greenspan has been especially puzzling for me. Here’s a guy who sent the Dow Jones crashing last year merely by mouthing the words “irrational exuberance.” That impressed me. (Even though I doubt that there is any other kind of exuberance than the irrational kind. Does a paunchy, middle-aged loser buy a red convertible in a fit of rational exuberance?)
I knew that if I was ever going to understand the economy, I had to crack Greenspan’s code. So I headed on an all-expenses-paid fact-finding trip to our swampy capital to catch his testimony last week before the Senate Budget Committee.
My timing couldn’t have been better. For months, the economy has been performing like an arthritic Wallenda. AOL Time Warner has laid off 2,000 workers, California can’t get enough power for the 35 million of its 50 million people who really should be living in other states and even the dotcom I was working for went belly up. (I know, imagine that!)
MAGIC WORDS
So what would the silver-tongued Svengali say this time to calm the jitters? And, more important, how would he do it? Would he just say the words “tax cut,” or would I be forced to divine his meaning like a gypsy reads a palm? Would I even understand what he was talking about? And, more important, are these rhetorical questions?
Clearly, I needed to prepare myself, so I grabbed USA Today. Now, usually I don’t conduct research with papers whose articles can’t get me through the typical bowel movement, but the paper had a front-page article reporting that Greenspan would “hint” at support for a tax cut. Bowels be damned!
But what did that mean, “hint”? Would he “hint” in the way that John Ashcroft hints that his personal heroes are Jefferson Davis and Stonewall Jackson or the way Gale Norton hints that her favorite escape from the tensions of modern life is to visit a national park and sit peacefully beneath a humming oil derrick?
And where would these hints turn up? In Greenspan’s combover? In his hunchbacked gait? In his rumbled, off-the-rack suits? (Note to self: Invest heavily in Men’s Wearhouse.)
Unsure, I entered the hearing chamber and there was The Man schmoozing with senators (and trying to extricate himself from new Sen. Hillary Clinton, who irrationally and exuberantly clung to Greenspan throughout the pretestimony photo op).
LEGAL IN NEVADA
The hearing on the state of our economy began only when Greenspan sat down at a table covered in green felt, a fitting symbol for an economy that sometimes seems like one big craps game. Before Greenspan could speak, however, senators from both sides of the aisle offered the kind of ego gratification that is illegal in every state except Nevada.
Greenspan just sat there motionless, a finger under his nose like a professor humoring an ambitious grad student. At one point, he reached for his water bottle (whose labels had been removed, lest the Cassandra of Cash be seen endorsing one product over another). Photographers snapped. Reporters scribbled. I gasped. Could this be my hint?
It turned out that he was only thirsty. Finally, Greenspan spoke. In a voice that sounded like he was narrating a History Channel documentary, the Maestro of Money said the time had come for “surplus-lowering policy initiatives” and “a pre-emptive smoothing of the ‘glide path’ to zero federal debt or, more realistically, to the level of federal debt that is an effective irreducible minimum.”
Wow! I didn’t know what he meant, but I told my broker to buy, buy, buy (full disclosure: I am now heavily invested in hoola-hoops). I looked over at new Michigan Democratic Sen. Debbie Stabenow for a clue but her face was scrunched up as if someone had asked her to compute the square root of cow.
But others on the panel heard it clearly enough: Greenspan was calling for a surplus-lowering policy initiative. Translating from the original Fed, that means tax cuts!
WHAT NORMAL HUMANS SAY
Of course, he didn’t really use the term “tax cuts,” preferring to call them “surplus-reducing actions.” And where a normal human being would just say “spending increases,” Greenspan used the term “outlay initiatives.”
But I felt I had cracked his code. Others had, too: Sen. Kent Conrad, the Democrat from North Dakota, who opposes Bush’s $1.6 trillion tax-cut plan, thanked Greenspan for declaring that taxes should not be cut “willy-nilly,” while Sen. Chuck Grassley, Repblican of Iowa, who favors debt reduction, praised Greenspan for again attacking congressional profligacy. Sen. Phil Gramm, the Texas Republican, saw an endorsement of large spending cuts and large tax cuts (but then doesn’t he always?), while Stabenow felt Greenspan had backed her plan for a prescription drug entitlement.
Meanwhile, committee chairman Pete Domenici, Republican of New Mexico, got stuck in Greenspan’s quicksand-“This ‘glide path’ is something new to me, and I’m trying to work on it, and I think I know what it means”-but it didn’t stop him from being convinced that Greenspan had fully endorsed Bush’s tax cut.
The Elvis of Economics had left the building, and I realized that I’d learned the key to Understanding Alan: You won’t understand a word he says, but you’ll hear whatever you want to hear.
