At the remarkable age of one hundred, the legendary central banker Alan Greenspan passed away yesterday. An economist who was nominated no fewer than five times by four different U.S. presidents, he spent twenty years at the helm of the Federal Reserve around the turn of the century. If central banks owe their de facto independence to any one individual, it is Alan Greenspan. In the 1990s, through repeated confrontations with several presidents, he secured for the Fed respect not only among politicians but also among the public.
Obituaries of Greenspan naturally offer a range of assessments of his career as well as anecdotes from the financial world—stories that, on the one hand, built his extraordinary popularity, but on the other significantly undermine the legacy with which he will enter history. In the latter case, we are of course referring to Greenspan’s lax approach to regulation, which likely contributed to the bubble in the U.S. housing market and subsequently to the financial crisis of 2008.
Nevertheless, if there is a current Greenspan legacy worth revisiting, it is his bold mid‑1990s view that the U.S. economy was entering a positive technological shock thanks to the internet. This, he argued, would put downward pressure on unit costs, slow inflation, and therefore remove the need to respond to the associated boom with aggressive interest rate hikes aimed at cooling the economy. As a result, the U.S. enjoyed a strong expansion throughout the 1990s.
A similar masterstroke is what the newly installed Fed leader Kevin Warsh would like to replicate. He sees a parallel between today’s rise of artificial intelligence and the “discovery” of the internet back then. However, if Warsh wants to push through Greenspan-style monetary tolerance toward a positive supply shock, he will face a major obstacle: Kevin Warsh in 2026 is no Alan Greenspan of 1995. Greenspan’s authority and reputation at the Fed in the mid‑1990s were enormous, not only among the general public but also within the expert community. This made him an overwhelmingly dominant figure within the Federal Open Market Committee (FOMC), the body that sets official U.S. interest rates, and he could easily bring other policymakers around to his view.
The relatively young Kevin Warsh has no such standing. It is therefore entirely possible that his position will not prevail at FOMC meetings; he may simply be outvoted, leaving the institution he leads to conduct monetary policy with which he disagrees. In other words, he could find himself in a situation that would have been utterly unthinkable within the Fed during the Greenspan era.
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