The City of London has lost its most enduring intellectual lodestar. Alan Greenspan, the former Federal Reserve chairman who guided global finance through booms, busts and everything in between, has died at the age of 100. For those of us who cut our teeth in the 1980s and 1990s, his name was synonymous with the very idea that markets, left to their own devices, would allocate capital with a wisdom no bureaucrat could match.
Greenspan’s fingerprints are all over UK fiscal policy, and not always for the better. His tenure at the Fed defined the 'Greenspan put', the implicit promise to slash rates whenever asset prices wobbled. This mindset infected Threadneedle Street. British Chancellors, from Kenneth Clarke to Gordon Brown, embraced the notion that mild inflation and loose money were acceptable trade-offs for growth. The result? A housing bubble that still distorts our economy and a generation of savers punished by near-zero rates.
Let's be clear: Greenspan was not solely responsible for the 2008 financial crisis. But his faith in self-regulating markets blinded him to the rot in subprime lending. The same rot eventually infected Northern Rock and RBS. The Bank of England’s subsequent quantitative easing, which continues to this day, is the direct legacy of his belief that central bankers can always mop up the mess.
The irony is that Greenspan’s own warnings about government spending were prescient. He argued for fiscal discipline, yet his low-rate environment made it easier for governments to borrow recklessly. UK public debt has soared from under 30% of GDP in 1990 to over 100% today. Every gilt yield spike we endure is a reminder that cheap money has a hangover.
As the markets open tomorrow, expect a brief moment of respect, then a sharp focus on the future. Greenspan’s death closes a chapter, but the plot continues. The Bank of England still struggles to tame inflation, and gilt yields remain volatile. The question his passing forces us to confront is this: Have we learned from his mistakes, or are we destined to repeat the cycle of bubble and bust?
In the end, Greenspan was a man of his time: an era of inflation taming, financial deregulation, and the triumph of free markets. That era is over. But his shadow looms large over every monetary policy meeting, every Budget statement, every capital flight scare. Rest in peace, Mr. Greenspan. Your bottom line is finally settled.
