Alan Greenspan, the former Federal Reserve chairman whose monetary policy shaped three decades of American economic history, died this morning at the age of 100. For City of London economists, his passing marks a final chapter in the era of financial deregulation that many blame for sowing the seeds of the 2008 crisis. Greenspan, who served as Fed chief from 1987 to 2006, was a disciple of Ayn Rand and free-market ideology.
He championed low interest rates and light-touch regulation, arguing that markets were self-correcting. His approach, derided by critics as 'Greenspan's put,' encouraged risk-taking and inflated asset bubbles. British commentators have been quick to point out the parallels with recent monetary policy.
'Greenspan’s legacy is one of cheap money and moral hazard,' said Sir Mervyn King, former governor of the Bank of England. 'We are still living with the consequences.' The reaction in the bond market has been muted so far, with gilt yields steady.
But analysts warn that his death may reignite debates about central bank independence and fiscal discipline. Greenspan’s tenure saw the dot-com bubble and the housing boom, both of which ended in painful corrections. Yet he remained unrepentant, famously telling Congress in 2008 that he had 'found a flaw' in his ideology.
The flaw, it turned out, was the belief that banks could police themselves. For those who lived through the chaos, his death is a reminder of how much faith was placed in unfettered capitalism. And how much was lost.
