[VIEWPOINT]Measuring Greenspan's briefcase

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[VIEWPOINT]Measuring Greenspan's briefcase

I wonder whether Alan Greenspan, chairman of the U.S. Federal Reserve Board, went to the two-day Fed meeting that began Wednesday with an empty briefcase.

Quick-witted Wall Street financial specialists predict the Fed's future actions on interest rates by gauging the thickness of Mr. Greenspan's briefcase. The Fed chairman is said to carry a thick briefcase filled with materials of persuasion whenever he intends to change interest rates. On the other hand, he carries a slim briefcase when he plans no interest-rate change.

Mr. Greenspan's every move attracts public attention, and one word from him can sway Wall Street. His influence is great enough for him to be called the economic president.

Mr. Greenspan took the position of Fed chairman in 1987 under the Reagan administration. He faced several financial crises but resolved them smoothly. He also stabilized the financial markets and prices. Many of his worshipers believe Mr. Greenspan contributed much to the long-term prosperity of the U.S. economy. They insist that Mr. Greenspan tops the world's other central bank governors in performance, though he is not the oldest among them. (Mr. Greenspan turns 76 years old this year. Masaru Hayami, the governor of the Bank of Japan, is 77. )

There was once a story that fund managers on Wall Street had established a "Greenspan Shrine" and got inspiration through meditation and prayers. The rumor proved to be a hoax in a magazine article, but it says much about Mr. Greenspan's mystique that many people initially took the story for truth.

Mr. Greenspan has been idolized not only in the United States. Some Korean analysts insist that the country needs a comparably powerful central bank governor. Other analysts disagree, insisting that Koreans should consider the nation's special conditions ?and the criticism of Mr. Greenspan in the United States.

Critics of the Greenspan-led Fed say they agree with the independence of the central bank but cannot accept a situation in which a single man sways finance and business. If the powerful man makes a wrong decision, swayed by political inclinations or otherwise, the economy would be affected negatively.

Paul Krugman, an economics professor at Princeton University, criticized Mr. Greenspan for supporting the Bush administration's tax-cut plan, despite the decline in the government surplus, after he had stressed balanced finances in the Clinton administration. Some economists say that the long-term prosperity of the U.S. economy has been led not by Mr. Greenspan but by the information technology industry. They have also criticized Mr. Greenspan for papering over financial crises simply by pouring in more money, which added to moral hazard in the financial sector.

David Jones, a Wall Street analyst, rated seven former and incumbent Fed chairmen in his book, "The Politics of Money," in the early 1990s. Mr. Greenspan scored 85 points, compared with 95, the highest grade, received by Marriner Eccles, who served as Fed chairman from 1934 to 1948. Mr. Eccles persuaded the Roosevelt administration to overcome the Great Depression through fiscal policies and restoring the battered credit of financial institutions, and secured the independence of the U.S. central bank.

By contrast, the Bank of Korea was too passive in weathering the 1997-98 foreign exchange crisis, many economists say. The central bank seems overwhelmed by the Ministry of Finance and Economy or the Financial Supervisory Commis-sion. As many political events, including a presidential election, are scheduled for this year, analysts are expressing growing concerns about whether the Bank of Korea will be able to set up and carry out neutral monetary policies.

Accordingly, the new Bank of Korea governor, who will be appointed in March, must comprehensively understand the duty and authority of a central bank and have proper experiences and ability. The new governor must also be able to attract support and trust from the ruling and opposition parties as well as the financial sector. We need to establish a tradition in which the central bank governor holds the office even if the administration is replaced.


The writer is an editorial writer of the JoongAng Ilbo.

by No Sung-tae

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