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The Man Who Knew: The Life and Times of Alan Greenspan
The definitive biography of the most important economic statesman of our time
Sebastian Mallaby's magisterial biography of Alan Greenspan, the product of over five years of research based on untrammeled access to his subject and his closest professional and personal intimates, brings into vivid focus the mysterious point where the government and the economy meet. To understand Greenspan's story is to see the economic and political landscape of the last 30 years--and the presidency from Reagan to George W. Bush--in a whole new light. As the most influential economic statesman of his age, Greenspan spent a lifetime grappling with a momentous shift: the transformation of finance from the fixed and regulated system of the post-war era to the free-for-all of the past quarter century. The story of Greenspan is also the story of the making of modern finance, for good and for ill.
Greenspan's life is a quintessential American success story: raised by a single mother in the Jewish émigré community of Washington Heights, he was a math prodigy who found a niche as a stats-crunching consultant. A master at explaining the economic weather to captains of industry, he translated that skill into advising Richard Nixon in his 1968 campaign. This led to a perch on the White House Council of Economic Advisers, and then to a dazzling array of business and government roles, from which the path to the Fed was relatively clear. A fire-breathing libertarian and disciple of Ayn Rand in his youth who once called the Fed's creation a historic mistake, Mallaby shows how Greenspan reinvented himself as a pragmatist once in power. In his analysis, and in his core mission of keeping inflation in check, he was a maestro indeed, and hailed as such. At his retirement in 2006, he was lauded as the age's necessary man, the veritable God in the machine, the global economy's avatar. His memoirs sold for record sums to publishers around the world.
But then came 2008. Mallaby's story lands with both feet on the great crash which did so much to damage Alan Greenspan's reputation. Mallaby argues that the conventional wisdom is off base: Greenspan wasn't a naïve ideologue who believed greater regulation was unnecessary. He had pressed for greater regulation of some key areas of finance over the years, and had gotten nowhere. To argue that he didn't know the risks in irrational markets is to miss the point. He knew more than almost anyone; the question is why he didn't act, and whether anyone else could or would have. A close reading of Greenspan's life provides fascinating answers to these questions, answers whose lessons we would do well to heed. Because perhaps Mallaby's greatest lesson is that economic statesmanship, like political statesmanship, is the art of the possible. The Man Who Knew is a searching reckoning with what exactly comprised the art, and the possible, in the career of Alan Greenspan.
Sebastian Mallaby's magisterial biography of Alan Greenspan, the product of over five years of research based on untrammeled access to his subject and his closest professional and personal intimates, brings into vivid focus the mysterious point where the government and the economy meet. To understand Greenspan's story is to see the economic and political landscape of the last 30 years--and the presidency from Reagan to George W. Bush--in a whole new light. As the most influential economic statesman of his age, Greenspan spent a lifetime grappling with a momentous shift: the transformation of finance from the fixed and regulated system of the post-war era to the free-for-all of the past quarter century. The story of Greenspan is also the story of the making of modern finance, for good and for ill.
Greenspan's life is a quintessential American success story: raised by a single mother in the Jewish émigré community of Washington Heights, he was a math prodigy who found a niche as a stats-crunching consultant. A master at explaining the economic weather to captains of industry, he translated that skill into advising Richard Nixon in his 1968 campaign. This led to a perch on the White House Council of Economic Advisers, and then to a dazzling array of business and government roles, from which the path to the Fed was relatively clear. A fire-breathing libertarian and disciple of Ayn Rand in his youth who once called the Fed's creation a historic mistake, Mallaby shows how Greenspan reinvented himself as a pragmatist once in power. In his analysis, and in his core mission of keeping inflation in check, he was a maestro indeed, and hailed as such. At his retirement in 2006, he was lauded as the age's necessary man, the veritable God in the machine, the global economy's avatar. His memoirs sold for record sums to publishers around the world.
But then came 2008. Mallaby's story lands with both feet on the great crash which did so much to damage Alan Greenspan's reputation. Mallaby argues that the conventional wisdom is off base: Greenspan wasn't a naïve ideologue who believed greater regulation was unnecessary. He had pressed for greater regulation of some key areas of finance over the years, and had gotten nowhere. To argue that he didn't know the risks in irrational markets is to miss the point. He knew more than almost anyone; the question is why he didn't act, and whether anyone else could or would have. A close reading of Greenspan's life provides fascinating answers to these questions, answers whose lessons we would do well to heed. Because perhaps Mallaby's greatest lesson is that economic statesmanship, like political statesmanship, is the art of the possible. The Man Who Knew is a searching reckoning with what exactly comprised the art, and the possible, in the career of Alan Greenspan.
800 pages, Hardcover
First published October 11, 2016
About the author
Sebastian Mallaby
10 books216 followersA Washington Post columnist since 1999. Worked for The Economist from 1986 - 1999.
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Displaying 1 - 30 of 98 reviews
February 28, 2017
Great read. Actually quite accessible, even if you aren't into economics. Very well-written, Mallaby gives what I consider an accurate and fair analysis of Greenspan, Greenspan's career and policies. Bit of a tangent here, but the Rand/Greenspan friendship connection recounted in this book was new to me and fascinating. I had no idea the depth to which the Ayn Randian ideology had ensorceled Greenspan. How a grown man beyond 40 can adhere to such a naive, self-serving, selfish, cold-hearted, vacuous ideology is somewhat beyond me, especially a man as mind-blowingly brilliant and smart as Greenspan, but hey, he isn't the first nor will he be the last. I think one of the most alluring aspects of this ideology for successful people like Greenspan is the meritocratic mythology and individual great man view of life the Randian ideology caters to, great ego-stroking for the successful and powerful.
I do respect that he was able to evolve his mindset and soften his hardline libertarianism, but the economy and our society have payed and continue to pay a price for how neoliberals of Greenspan's ilk recrafted our policy, society, and economy and allowed corporations to hijack the system and dictate policy. Brilliant man though, interesting person, shame that he is emblematic of those who paved the way for a lot of today's inequality problems. It's frustrating, but I do think he held many of his views in good faith, as off base as I may consider them. He is not a bad guy, he did show ability to shift positions and evolve, but his love and lionization of 19th century robber barons is a key fact in understanding his mindset, tells you all you need to know. It is a single fact that encapsulates his mindset, deeply problematic point of view and instructive to understanding this guy. It encapsulates worship at the altars of corporate power, power in general, greed, money, wealth, coupled with the magical thinking that free markets (no such thing, it's a gimmicky marketing term) solve everything, winners should take all, yadda yadda. As you can obviously tell I consider this way too simplistic, wrong, and frankly immoral, but I still can't wrap my head around how this ideology sucks in so many clearly smart thoughtful people. I guess those on the other side will say I'm ensorceled by another ideology, haha, fair enough fair enough ;)
There is way more though than Greenspan connection to Randian ideology in the book, it encompasses a lot of political and economic history of the US post 50s. Even if you don't like Greenspan this book is insightful and interesting to get a deeper feel for US economic policy, history, inner-workings of government and government policy.
I do respect that he was able to evolve his mindset and soften his hardline libertarianism, but the economy and our society have payed and continue to pay a price for how neoliberals of Greenspan's ilk recrafted our policy, society, and economy and allowed corporations to hijack the system and dictate policy. Brilliant man though, interesting person, shame that he is emblematic of those who paved the way for a lot of today's inequality problems. It's frustrating, but I do think he held many of his views in good faith, as off base as I may consider them. He is not a bad guy, he did show ability to shift positions and evolve, but his love and lionization of 19th century robber barons is a key fact in understanding his mindset, tells you all you need to know. It is a single fact that encapsulates his mindset, deeply problematic point of view and instructive to understanding this guy. It encapsulates worship at the altars of corporate power, power in general, greed, money, wealth, coupled with the magical thinking that free markets (no such thing, it's a gimmicky marketing term) solve everything, winners should take all, yadda yadda. As you can obviously tell I consider this way too simplistic, wrong, and frankly immoral, but I still can't wrap my head around how this ideology sucks in so many clearly smart thoughtful people. I guess those on the other side will say I'm ensorceled by another ideology, haha, fair enough fair enough ;)
There is way more though than Greenspan connection to Randian ideology in the book, it encompasses a lot of political and economic history of the US post 50s. Even if you don't like Greenspan this book is insightful and interesting to get a deeper feel for US economic policy, history, inner-workings of government and government policy.
January 31, 2018
This is not just a book about Greenspan, but about an era. The problem of making caricatures of people is that they become overly lionized and then overly vilified. In the case of Greenspan, I think his purported omniscience also game a lot of policymakers cover to deregulate (i.e. Rubin et al). The book is fair to Greenspan, but it does veer into apologia at times. The author rightfully paints Greenspan as not necessarily anti-regulation or not all that free market libertarian. But if he wasn't those things privately (which I believe), he sure did a good job convincing the public that he was and for a position that relies on public messaging, it amounts to the same thing. There are a few mistakes here too though minor ones. He credits Greenspan with Nixon's black capitalism program, but that emanated elsewhere and Greenspan just supported the idea. The book is a must-read for anyone interested in finance or financial markets
July 18, 2023
This is my first biography by Mallaby, so I'm not sure if this holds for any of his other works, but my overall impression is that Mallaby is too cynical, and although his conclusion paints Greenspan in a better light than a lot of contemporary analysts, the overall picture still comes off as far too negative, focusing on and highlighting perceived failures. There are definitely subjects that deserve overly negative treatment, for example, Hitler or Stalin, but I generally like to read biographies with more of a benevolent slant toward their subject. To be clear: I'm not saying Mallaby treated Greenspan like Hitler, but just that it felt like he was missing that good will factor toward his subject.
I was interested in this biography because Greenspan was seemingly a walking contradiction to me. He was known in his early days (60s) as a champion of laissez faire capitalism and he wrote on the subject for Ayn Rand publications (e.g. the book Capitalism: The Unknown Ideal). From those roots he somehow ascended to one of the most hated positions by all capitalists and market proponents: Fed Chairman. It’s basically unthinkable for a free market person to take this job. In recent years (2000's) I had heard Greenspan had long ago abandoned laissez faire capitalism, but I didn't know the story on how that happened, and it wasn't like he was a communist denouncing capitalism from his high tower, so I wasn't positive if his transformation was even true. I wanted to read this book to understand the man and this core contradiction, while learning more about the position of Fed Chairman.
The coverage of the 60s and his relationship with Rand and her “Collective” is covered in a chapter “Ayn Rand’s Undertaker”, which is in reference to Rand originally making fun of him for his attire and demeanor. The chapter here is pretty superficial and doesn’t go into too much depth of Greenspan’s intellectual thought with respect to Rand’s philosophy, but it does cover the Rand hit job checklist: cult, crazy, naive, etc. For all of the people who still need that reinforced whenever Rand is mentioned, you won’t be disappointed by the cliché attacks on her. Throughout his Nixon adviser roles, he did promote the laissez faire beliefs for the campaign and president, but they were all ignored. Honestly, as a person, I connected with Greenspan most in this section. Just a guy giving his honest opinion on a subject after diligently researching it and not caring if he is completely ignored. He is paid to give his opinion and he is confident enough to not care if people don’t like it. They can do what they will with it. I found this admirable, not letting politics interfere with what he thought was right. The one exception with being completely ignored is in abolishing the draft. This is the one Rand idea Greenspan promoted as an advisor that the team agreed with. Then there is a transition in his behavior. By the time he played a part in Ford’s team, he did not even promote the ideas anymore. As early as 1975, there is a section explaining Ford’s decision on whether or not to veto a $22.8 billion stimulus that was larger than Ford’s original proposal which was seen as a disaster in fiscal responsibility by market proponents. Two members of Ford’s cabinet advised the president to veto while Greenspan caved to the political pressures and advised Ford to sign it. This was the turning point where Rand ideology became irrelevant to Greenspan. Essentially, Greenspan transforms into a pragmatist and a politician starting with this decision. Mallaby sums it up as:
“Half a year into his tenure, Greenspan had completed his journey from Ayn Rand’s outsider salon to the inner circle of power; he might still condemn the status quo from time to time, but in truth he was now part of it…Ideas were not what drove him after all; his courteous, clubbable, and non confrontational manner proved to be a better predictor of his conduct in office than his libertarian ideology.”
Post the early 80s, and in all of Greenspan’s meaningful policy making, Mallaby makes it clear that Greenspan had already disavowed Rand’s politics, and that only the shadow of laissez faire capitalist beliefs existed. Perhaps two of starkest changes and clear examples of how this surfaces in his opinions is in bail outs (pro) and the gold standard (con). According to Mallaby, Greenspan stays in touch with Rand, albeit with strong arguments between the two implied/described with respect to his role and influence in politics until her death in 1982. For such a 'cult' leader to have so little influence on someone in their inner circle, it makes one question the cult’s actual power or existence.
After this contradiction was settled, the book became much less interesting to me. I’ll admit that it probably had a lot to do with my motivations for wanting to read it in the first place, but I think there are a lot of other reasons also:
- Greenspan turns into a typical politician: someone who blows in the wind with whatever the popular beliefs are in the given moment. So while there are some interesting stories, for example, him butting heads with Kissinger over foreign policy when economics plays a role, there is just a lot of detail about seemingly inconsequential things. The old Greenspan who made splashes in congressional hearings being an ideologue is gone. Now it's just about playing the game and gaining influence.
- When Greenspan becomes Fed Chair, there are some interesting stories regarding the relationship between the executive branch and the Fed, especially comparing HW Bush vs. Clinton, there’s the Mexico bailout, the tech bubble etc., but the overall coverage of the Fed day to day is boring, and the analysis of Greenspan’s decisions are too Monday Morning quarterbacking for me. This relates to my overall conclusion that Mallaby is too cynical. I get the feeling that Mallaby’s analyses are omniscient without much supporting evidence provided at all and that Greenspan could have/should have reacted according to them. I also think more could have been explained related to the response after the 9/11 attacks, as this was certainly an interesting time at the fed.
- All Fed related history post tech bubble builds up to the 2008 crisis. To me the decisions of 2002 to 2006 were analyzed with too much focus on 2008, but without enough well rounded analysis of 2008. While I personally agree with a lot of what Mallaby concludes here, that the Fed low interest rate environment (1 percent in 2003) is one of the causes of the housing bubble, there wasn’t enough analysis of what else was happening in other branches of government contributing and what Greenspan’s realistic role was (there is an implication that maybe some shadow of laissez faire theology clouded his judgment in derivative regulation, and that he failed in this respect, but it is really unclear what could be expected from his position without congress). To be fair, in the conclusion, Mallaby agrees that Greenspan probably couldn’t have done anything to help in this regard, but part of my problem with the book is not being able to keep straight the take-aways and conclusions, and this is definitely the most confusing aspect.
So 3 stars to me is that it is worth reading if you are specifically interested in the subject. There is a ton of historic detail in these pages, and a lot to learn from, but there are long stretches where it is a difficult read and it is quite difficult to keep the take-aways straight. Maybe this is partly due to the fact Greenspan has so many contradictions, but Mallaby doesn’t seem to help with this at all. In the conclusion he gives a list form to some pros and cons of Greenspan’s actual decisions, and there are some key contradictions that stood out as muddying the story thoroughly for me:
- With respect to Rand, Mallaby gives Greenspan an unequivocal black mark for “falling under Rand’s eccentric spell”, but then gives him a gold star for things Rand influenced. For example: Gold star for analysis of bubbles and monetary policy and housing/finance in the late 70s (Rand was super critical of the Fed exacerbating boom/bust cycles), Gold star for rejecting Nixon price controls in the 70s, gold star for rejecting Reaganite supply siders in the 80s, and implied gold star for rejection of the efficient market hypothesis. Those are more than half of all the gold stars Mallaby gives to Greenspan, and clear instances where Greenspan aligned with Rand, so it’s unclear why he gets the black mark for working with Rand. Rand is either inconsequential or not and it's confusing what he thinks given the black mark he gives to Greenspan for the association. Consequential enough to get a black mark but inconsequential enough to ignore any ‘good’ decision that was influenced by her thought if she was consequential. Perhaps the hatred of Rand goes beyond the economic realm, and that’s why he gets the black star, but if that is why, then maybe that should have been explained, because it’s still unclear to me what part of her philosophy he actually adopted (he wrote for her chiefly on economics and politics, not things like metaphysics, God, ethics, etc.). We don’t really learn about Greenspan’s personal beliefs beyond politics (with the exception of some hero worshiping of old time industrialists)
- With respect to the Fed’s role in fighting bubbles, I already mentioned the seeming contradiction: Greenspan gets a black mark for not fighting the bubble, but Mallaby also acknowledges he would have failed from the regulatory perspective anyway. So the interest rate policy is the main objection? It’s hard to understand the takeaway here.
I will say that if the short term rate policy is the main take away from the bubble fighting contradiction, it seems the current Fed Chairs are making the same mistakes today (low rates for a long time during a great economy and then telegraphed, small and steady rate hikes) and that perhaps we should consider Mallaby’s takeaway in the analysis of our current macro economic policies.
I was interested in this biography because Greenspan was seemingly a walking contradiction to me. He was known in his early days (60s) as a champion of laissez faire capitalism and he wrote on the subject for Ayn Rand publications (e.g. the book Capitalism: The Unknown Ideal). From those roots he somehow ascended to one of the most hated positions by all capitalists and market proponents: Fed Chairman. It’s basically unthinkable for a free market person to take this job. In recent years (2000's) I had heard Greenspan had long ago abandoned laissez faire capitalism, but I didn't know the story on how that happened, and it wasn't like he was a communist denouncing capitalism from his high tower, so I wasn't positive if his transformation was even true. I wanted to read this book to understand the man and this core contradiction, while learning more about the position of Fed Chairman.
The coverage of the 60s and his relationship with Rand and her “Collective” is covered in a chapter “Ayn Rand’s Undertaker”, which is in reference to Rand originally making fun of him for his attire and demeanor. The chapter here is pretty superficial and doesn’t go into too much depth of Greenspan’s intellectual thought with respect to Rand’s philosophy, but it does cover the Rand hit job checklist: cult, crazy, naive, etc. For all of the people who still need that reinforced whenever Rand is mentioned, you won’t be disappointed by the cliché attacks on her. Throughout his Nixon adviser roles, he did promote the laissez faire beliefs for the campaign and president, but they were all ignored. Honestly, as a person, I connected with Greenspan most in this section. Just a guy giving his honest opinion on a subject after diligently researching it and not caring if he is completely ignored. He is paid to give his opinion and he is confident enough to not care if people don’t like it. They can do what they will with it. I found this admirable, not letting politics interfere with what he thought was right. The one exception with being completely ignored is in abolishing the draft. This is the one Rand idea Greenspan promoted as an advisor that the team agreed with. Then there is a transition in his behavior. By the time he played a part in Ford’s team, he did not even promote the ideas anymore. As early as 1975, there is a section explaining Ford’s decision on whether or not to veto a $22.8 billion stimulus that was larger than Ford’s original proposal which was seen as a disaster in fiscal responsibility by market proponents. Two members of Ford’s cabinet advised the president to veto while Greenspan caved to the political pressures and advised Ford to sign it. This was the turning point where Rand ideology became irrelevant to Greenspan. Essentially, Greenspan transforms into a pragmatist and a politician starting with this decision. Mallaby sums it up as:
“Half a year into his tenure, Greenspan had completed his journey from Ayn Rand’s outsider salon to the inner circle of power; he might still condemn the status quo from time to time, but in truth he was now part of it…Ideas were not what drove him after all; his courteous, clubbable, and non confrontational manner proved to be a better predictor of his conduct in office than his libertarian ideology.”
Post the early 80s, and in all of Greenspan’s meaningful policy making, Mallaby makes it clear that Greenspan had already disavowed Rand’s politics, and that only the shadow of laissez faire capitalist beliefs existed. Perhaps two of starkest changes and clear examples of how this surfaces in his opinions is in bail outs (pro) and the gold standard (con). According to Mallaby, Greenspan stays in touch with Rand, albeit with strong arguments between the two implied/described with respect to his role and influence in politics until her death in 1982. For such a 'cult' leader to have so little influence on someone in their inner circle, it makes one question the cult’s actual power or existence.
After this contradiction was settled, the book became much less interesting to me. I’ll admit that it probably had a lot to do with my motivations for wanting to read it in the first place, but I think there are a lot of other reasons also:
- Greenspan turns into a typical politician: someone who blows in the wind with whatever the popular beliefs are in the given moment. So while there are some interesting stories, for example, him butting heads with Kissinger over foreign policy when economics plays a role, there is just a lot of detail about seemingly inconsequential things. The old Greenspan who made splashes in congressional hearings being an ideologue is gone. Now it's just about playing the game and gaining influence.
- When Greenspan becomes Fed Chair, there are some interesting stories regarding the relationship between the executive branch and the Fed, especially comparing HW Bush vs. Clinton, there’s the Mexico bailout, the tech bubble etc., but the overall coverage of the Fed day to day is boring, and the analysis of Greenspan’s decisions are too Monday Morning quarterbacking for me. This relates to my overall conclusion that Mallaby is too cynical. I get the feeling that Mallaby’s analyses are omniscient without much supporting evidence provided at all and that Greenspan could have/should have reacted according to them. I also think more could have been explained related to the response after the 9/11 attacks, as this was certainly an interesting time at the fed.
- All Fed related history post tech bubble builds up to the 2008 crisis. To me the decisions of 2002 to 2006 were analyzed with too much focus on 2008, but without enough well rounded analysis of 2008. While I personally agree with a lot of what Mallaby concludes here, that the Fed low interest rate environment (1 percent in 2003) is one of the causes of the housing bubble, there wasn’t enough analysis of what else was happening in other branches of government contributing and what Greenspan’s realistic role was (there is an implication that maybe some shadow of laissez faire theology clouded his judgment in derivative regulation, and that he failed in this respect, but it is really unclear what could be expected from his position without congress). To be fair, in the conclusion, Mallaby agrees that Greenspan probably couldn’t have done anything to help in this regard, but part of my problem with the book is not being able to keep straight the take-aways and conclusions, and this is definitely the most confusing aspect.
So 3 stars to me is that it is worth reading if you are specifically interested in the subject. There is a ton of historic detail in these pages, and a lot to learn from, but there are long stretches where it is a difficult read and it is quite difficult to keep the take-aways straight. Maybe this is partly due to the fact Greenspan has so many contradictions, but Mallaby doesn’t seem to help with this at all. In the conclusion he gives a list form to some pros and cons of Greenspan’s actual decisions, and there are some key contradictions that stood out as muddying the story thoroughly for me:
- With respect to Rand, Mallaby gives Greenspan an unequivocal black mark for “falling under Rand’s eccentric spell”, but then gives him a gold star for things Rand influenced. For example: Gold star for analysis of bubbles and monetary policy and housing/finance in the late 70s (Rand was super critical of the Fed exacerbating boom/bust cycles), Gold star for rejecting Nixon price controls in the 70s, gold star for rejecting Reaganite supply siders in the 80s, and implied gold star for rejection of the efficient market hypothesis. Those are more than half of all the gold stars Mallaby gives to Greenspan, and clear instances where Greenspan aligned with Rand, so it’s unclear why he gets the black mark for working with Rand. Rand is either inconsequential or not and it's confusing what he thinks given the black mark he gives to Greenspan for the association. Consequential enough to get a black mark but inconsequential enough to ignore any ‘good’ decision that was influenced by her thought if she was consequential. Perhaps the hatred of Rand goes beyond the economic realm, and that’s why he gets the black star, but if that is why, then maybe that should have been explained, because it’s still unclear to me what part of her philosophy he actually adopted (he wrote for her chiefly on economics and politics, not things like metaphysics, God, ethics, etc.). We don’t really learn about Greenspan’s personal beliefs beyond politics (with the exception of some hero worshiping of old time industrialists)
- With respect to the Fed’s role in fighting bubbles, I already mentioned the seeming contradiction: Greenspan gets a black mark for not fighting the bubble, but Mallaby also acknowledges he would have failed from the regulatory perspective anyway. So the interest rate policy is the main objection? It’s hard to understand the takeaway here.
I will say that if the short term rate policy is the main take away from the bubble fighting contradiction, it seems the current Fed Chairs are making the same mistakes today (low rates for a long time during a great economy and then telegraphed, small and steady rate hikes) and that perhaps we should consider Mallaby’s takeaway in the analysis of our current macro economic policies.
October 16, 2016
Mallaby's verdict on Greenspan: Guilty, but not as charged. Read more here: http://unassumingeconomist.com/2016/1...
February 27, 2024
Took me two whole months but I’m finally done!!! Although it’s super long, this book was actually so informative - I learned so much economic history and just like general history as well. Also according to this book Ayn Rand lived across the street from the Morgan aka I currently live in Ayn Rand’s building which I think is hilarious
November 6, 2016
How much Greenspan does one need in their life? I contemplated this as I pondered buying and reading this biography. I had already read his own memoir and other books on his tenure as Fed chairman. The answer? I could use more Greenspan.
This biography doubles as a great narrative history of monetary and fiscal policy during the administrations of Nixon, Ford, Carter, Reagan, Bush 41, Clinton, and Bush 43.
This biography doubles as a great narrative history of monetary and fiscal policy during the administrations of Nixon, Ford, Carter, Reagan, Bush 41, Clinton, and Bush 43.
February 9, 2017
I came to this book with the high expectation that this would be a Caro-like experience: large in pages, heavy on minute detail, few gaps in the timeline of the subject covered, with poignant analysis by the author. I must claim satisfaction with Mallaby's book as to expectations 1 & 4; though 2 & 3 were less than Caro-like. This is not a very heavily detailed or difficult book. A doctorate in economics is not required to wade through it. In fact, bare familiarity with the subject and average intelligence should suit you fine. Decades are dispensed with in a light chapter or two, but this does smooth the read and push it fonward. Some of the details provided might seem less than pertinent to some readers, such as who Allan happened to be dating at a given time, but I have to admit these segue ways into his social life are important to Mallaby's premise, and leaving them out would weaken Mallaby's argument. This is a remarkably engaging biography of a young jazzman who arguably became the greatest, or most infamous, head of the U S Federal Reserve. From playing the sax he went on to fine tune the economy from the eighties through the roaring nineties, only to later step down when the Maestro's economy was on the verge of playing a chaotic concert of disastrous proportions not experienced in most people's lifetimes. Alan's unique journey took him from humble beginnings to a status of quick & unlikely celebrity and then to quicker public disdain & ignominy. Mallaby charts how this all became possible. His contention is that AG's particular talent for being The Man Who Knew was a direct result of being a "New York school" economist, rather than of the Chicago(Friedman) or Boston(Keynes) variety. Much like that other "New York school" guy the young Robert Moses, AG was a man who paid attention to all the myriad details, sought them out, mastered them analytically, and passed that distillation on to clients.....at a semi-reasonable price, of course. AG had a specific fascination with metals, steel in particular, which served as indicators for where the economy could be expected to turn, up or down. Increase In the output of steel indicated an increase in heavy production, etc. Mastering these details required quite a bit of "library" time, pouring over source materials, graphs, statistics, and keeping abreast of their changes. He served as the "economics expert" for the Rand circle. Ayn, whose knowledge of sophisticated.economics ended abruptly with the passbook account, dubbed him as "the undertaker" for his lack of hipness. Rand gave the man of many details the gift of a life philosophy. Thanks, Ayn.... Well, no worry. This man of detail understood that particular circumstances often requires one to jettison the abstract and impractical for the pragmatic. Especially the personally pragmatic. Basically, Mallaby states that the important ability of AG wasn't In his wise choice of economic theory, or interpretive prowess, but rather in his abilities to deftly navigate the political shoals of a mercurial Washington. In short, his long term strength was as a politician, not as an economist; though he certainly had his moments of astute prescience in economic forecasting. AG began his foray into politics as an economic advisor with Nixon; however, AG didn't cotton to RN; likely he was repulsed by his paranoia and bigotry. Ford was a more salubrious boss. GF was an important stop in AG's education according to Mallaby. As AG is advising Ford of economic troubles ahead he notices Ford getting more tense and excited. AG realized the difficulty in properly advising a politician of impending economic realities, but still leaving open room for the possibility of successfully arguing against interventionist policies. Forecasting a tornado, then advocating no action as remedy offers formidable challenge to free traders dabbling in politics. Reagan's obsession with gold must have made AG nostalgic for his old Rand days, while leaving him disconcerted that the president of the United States could be obsessed with a Romantic era economist cum quack's obsessions. AG's eventually appointment as chairman of the Federal Reserve Board as well as the Federal Open Market Committee made him the top economist of the leading industrial country in the world. From the perch of his chairman's seat AG could give full vent to his weltphilosophie. These circumstances must have given some middlebrows pause: a former Randian setting interest rates and ostensibly governing financial markets. Only during a presidency in which the chief executive felt dislodging the dollar from gold put the nation in moral peril could such an appointment be imagined. Middlebrows should have known better. AG patiently explained to the Gipper that the conditions required (restraining monetary inflation) to attach gold to the dollar were such that once accomplished they didn't require dollars to be backed by gold. Battling inflation was the cure and gold's services weren't required. I suspect Reagan never believed him. Once a devotee of Bastiat..... Well, anyway, the same trepidation over the possible influence of hero worship could be applied to AG's appointment and it was. AG's first high profile test as referee of the marketplace came with the crunch in 87. AG moved quickly to ensure continued market liquidity. This pattern of financial bailout welfare later became known as the "Greenspan put". Focusing on keeping the clamps on inflation while cleaning up after market "corrections" proved to be the practical Greenspan approach in economics. His preference was to speak softly and carry a little stick. The first part was rather novel with Greenspan. Prior to his chairmanship, a rise or fall of interest rates weren't announce to the public via the media. AG's deft exploitation of the media in carrying forth his message was only surpassed by his personal relationship with reporters. Early on, AG made sure never to offend or deny the fourth estate unless necessary. As his surreptitious hintings given to the public via speeches and interviews failed to render proper effect, AG allowed the introduction of "forward guidance" so the players in the market would be certain which way the Fed & Greenspan expected the market to go. As AG had a tendency to raise or lower interest rates by quarter points only, sometimes long term interpretations of the Fed's direction could be more than somewhat muted, if not outright opaque. Explicitly announcing rates weren't expected to rise in the foreseeable future made the Fed's future expectations & plans very clear, yet set the path towards financial recklessness and market discipline abuse which tarnished AG's last year's. Manipulating media is almost always good for politics; manipulating the media could often produce disastrous economic outcomes. AG's pursuit against the quasi-governmental agencies Fannie and Freddie Mac was an attempt at good economic refereeing. AG dropped the matter almost entirely because it was better politics to do so, though ultimately economically devastating. Concerning his innate belief in a market discipline, AG appears to have remained faithful to the end of reign. This was probably because he felt it was the only religion in town still worthy of belief, though the abject lies of Enron's executives almost turned him into a heretic. Supervision of financial institutions was a Herculean task unbefitting a Maestro. Easier to just claim it was in the best interest of those concerned to play fair and pretend to be done with it. Let the music play on. Up until 2008 the Fed had acted as economic hazmat of last resort and had done so with substantial success. Bubbles are notoriously difficult to puncture, as there's always plenty of naysayers ready to profit on a claim of their non-existence. AG displayed a genuine diffidence for slowing any form of perceived economic growth. The consequences of precipitate interference, he knew, could result in a Jonah prophecy dilemma, which he sought to avoid throughout his tenure. The politician in Greenspan also understood that the public understood inflation as that thing which doubles the cost of your eggs or reduces the size of your loaf of bread at the same price. Advertising yourself as the market policeman of inflation wasn't particularly astute economics as the United States entered the global marketplace, but it was great politics. And practicing great politics could get him only one thing: reappointment as chairman of the Fed and de facto reappointment as top America's economist. Mallaby entitles his book The Man Who Knew and he makes frequent references to it. In the 70s & 80s AG was at the top of his forecasting game. At a time when some thought a computer program should replace the FOMC meetings, Greenspan offered variety of knowledge as well as superior analytical skills. It was only a matter of time before computers would have their revenge, though. Mallaby hints that the 90s ushered in an age where AG was actually no longer the man who knew.....even in his given field. The new financial tools were beyond his ken. This isn't too surprising, as it has been discovered later that they were mostly beyond their makers', too. As finance introduced itself to quants, the chairman became more philosophical. This turned out to be an unfortunate divergence just as the mixture of physicists and economists turned loans into near nonsense. Companies could no longer properly assess their own exposure to risk right at the moment risk was flung to the far corners of the globe. Whether an institution became Too Big To Fail or ready to be sacrificed to the bastard gods of profit, executives and traders made their money while AG pondered business ethics. Greenspan might be remembered now as the man with a "flaw", but his public persona appeared to be steady at watch for almost two decades of American economic supremacy. He was the watchman who scrutinized bread and steel; rewarded troublemakers less than worthy of it; and bolstered the image of the free market throughout the world. AG was a benefactor to many, a direct foe of surprisingly few, and a man who in the end paid for the contradictions between his heartfelt economic philosophy and his political desires with his once colossal reputation, ironically first build up upon both these shoulders. Mallaby paints his portrait of the man in deep hues and contours; a worthy literary chronicle of AG's greatest achievements, as well as his greatest faults.
May 9, 2017
A well-balanced look at Alan Greenspan's role in macroeconomics and monetary policy told through a biographical narrative lens. The author obviously respects Greenspan and obviously disagrees with aspects of his underlying philosophy on macroeconomics and political economy, but manages to provide insight and understanding without too much judgment (most of the judgment being to defend his choices or motivations). The book flows well and is pleasant to read while diving into politics, the media, bureaucratic infighting and turf wars, and lots and lots of economics. The main flaws are the author jumping in with his own economic preferences and a failure to maintain the narrative while discussing the end of Greenspan's tenure as chairman of the Fed. The first flaw is annoying because the author acknowledges that Greenspan accepted the consequences of his decisions and pragmatic limitations on his ideals, but at the same time the author barely hints at the limitations of the policy alternatives he suggests and almost completely ignores the potential unintended consequences those choices would likely cause. The second flaw is disappointing because the book is so very well written until, in a few spots and one full chapter toward the end, the narrative completely collapses and the book turns into at best loosely connected vignettes that seem to be included only so that Greenspan's entire career was included in the book. If you strongly dislike economics or politics, this may be a bit too much for you. For everyone else, it's an interesting biography that's worth the read, despite some pronounced flaws.
August 13, 2017
In summary, read the conclusion and save yourself the journey. Sometimes, all I have to do is look at how long it takes me to finish a book to know how bad it is.
Alan Greenspan had a fairly interesting life, but it is not really remarkable. As the author stated in the conclusion, America, in general, tries to ascribe too much credit (and too much blame) to her heroes. Therefore, those who try to villainize Greenspan fail to recognize how little of an impact he could actually make. If he tried to swim against the tide that carried him, he was ignored (his attempt to increase banking regulations in 2001). Similarly, when Sec of Treasury Paul O'Neil refused to endorse the second Bush tax cut circa 2002, he was fired. In Washington, if you aren't the President, you don't have much ground to stand on.
I was unaware of his libertarian views or his relationship with Ayn Rand. I never knew he was a successful businessman before heading the Fed. It was fascinating to learn about the backstory behind people who eventually became Fed governors.
I guess it was the conclusion that really got to me. After 30 some hours of listening to the book, the author concluded that Greenspan wasn't that big of a deal. It is nice to know the reasons why, but I feel like the book should have been much shorter.
The book also illustrated the point that when a person enters government, he/she learns to sell himself/herself out or that person is removed from government (either fired or leaves for "personal" reasons).
Alan Greenspan had a fairly interesting life, but it is not really remarkable. As the author stated in the conclusion, America, in general, tries to ascribe too much credit (and too much blame) to her heroes. Therefore, those who try to villainize Greenspan fail to recognize how little of an impact he could actually make. If he tried to swim against the tide that carried him, he was ignored (his attempt to increase banking regulations in 2001). Similarly, when Sec of Treasury Paul O'Neil refused to endorse the second Bush tax cut circa 2002, he was fired. In Washington, if you aren't the President, you don't have much ground to stand on.
I was unaware of his libertarian views or his relationship with Ayn Rand. I never knew he was a successful businessman before heading the Fed. It was fascinating to learn about the backstory behind people who eventually became Fed governors.
I guess it was the conclusion that really got to me. After 30 some hours of listening to the book, the author concluded that Greenspan wasn't that big of a deal. It is nice to know the reasons why, but I feel like the book should have been much shorter.
The book also illustrated the point that when a person enters government, he/she learns to sell himself/herself out or that person is removed from government (either fired or leaves for "personal" reasons).
December 12, 2016
You might find it hard to believe that I could give 5 stars to a book written about Alan Greenspan, one that spans 700 pages, but I must! I couldn't put the book down! I learned so much about the Fed, about a numbers nerd rising to Godlike status over his career, about the limitations and machinations of government...a long list that leads me to say if you have any interest in economics, the markets, how government works, regulation vs free markets...then give this book to yourself for the holidays! :)
December 19, 2016
Excellent biography by Mr. Mallaby of one of the most influential public figures of the last 40 years. Combining insightful reflections of Mr. Greenspan's personal life with a great overview of the economic and political debates over the last four decades, The Man to Know is essential reading for anyone interested in monetary, economic or political affairs.
January 1, 2017
Surprisingly honest account of his life even though author supposedly had the blessing of Greenspan. Good portrait of man that ended up more worried politics and social status versus financial environment. However, could he have really been able to stand up to the bankers if he wanted?
December 29, 2017
The Man Who Knew, the Life and Times of Alan Greenspan is an example of extensive narrative biography of one of the most revered men to ever serve as Chair of the Federal Reserve, as well as one of the most widely hated figures of the current era, largely seen as a principal object of blame for the the 2008/2009 financial crisis. The book won an award from the Financial Times as the McKinsey Business Book of the Year in 2016. The book came recommended to me by a couple of places, including by those at Foreign Affairs. Naturally, it peaked my interest.
Though I started my journey to maturity during the financial crisis, the exact sequence of events have long since fell into the realm of myth for me. Different political groups, different series of economists, and a vast host of pundits competing for my attention (and everyone else's) seized at the opportunity to grab a pulpit and issue commands of truth, only to fall flat or to be contradicted by the next gospel bearer. Greenspan was a name that was said often, but I have to confess to having completely forgotten about him when I picked up the book.
I had expected a book of economics through the funnel piece of a man, but what I received was a biography of a man. Sebastian Mallaby certainly understands the right way to get into my heart with his writing. What follows from the second chapter to the penultimate chapter is the story of one man's life, and a career to be envied. There are many humanizing moments that get put on display, and Greenspan is centered at the heart of American politics. He is treated fairly, perhaps even more fairly than he deserved, at many points in the writing. A decent chunk of this section can be overlong, and as with any long-form biography there is plenty that any individual may want excised from the final version.
Paradoxically, there is a lot this book does not explore, and makes no effort to. While Greenspan's engagement with the administrations were at first emphasized greatly, as well as when it came to wrestling for the independence of the Fed, once the battle was won the administrations appear passive, and their interactions become far less fleshed out. The shift then becomes set up for a house of cards, and that narrative begins to take stride. Little is said of Greenspan after the Crisis, and where he stands now, which could also have proved instrumental. Instead, he simply vanishes in the aftermath of the crisis.
The last chapter of the book details the destruction of Alan Greenspan's career and reputation after his retirement from the Fed during the financial crisis. It is here that the myth of my teenage years comes back to life, and the discussion revived my interest - which had been dangerously close to waning. This is a chapter I encourage people to read, even if they read nothing else, and to draw their own opinions from. Most of us lived through this, and it is from here that the core modus operandi of the book comes into being. The Maestro, the Man who Knew, a near Infallible Being was humbled, but not by the charge laid against him. It has a bit of poignancy, as does the collapse of the era that he had all but carried on his back. Any further judgment is unnecessary, and will only prejudice the person who reaches this point after reading this.
The conclusion/epilogue of the book is in some ways very useful, but at times comes off as trite. Randian Great Men have been an undercurrent of the book, but Mallaby makes the great moral of his text that Great Men don't exist. That American society builds them up in the good times, and destroys them in the bad times. Alan Greenspan's great mistake, the one that makes him "guilty, but not as charged" is that he underestimated the potential for failure in a financial system that he no longer truly understood, and that the system itself was changing beneath him. At times Greenspan understood that the framework he worked under contained flaws, perhaps fatal ones, but never adequately addressed them. Greenspan had some notion of the coming chaos, and did some things to counter them, but had misjudged the direness of the circumstance. He was far from the ideologue that others stated that he was.
However, if I may contribute, Sebastian overreaches when he discounts the idea of great men in his final pages. For though Alan Greenspan was not a mythical great man of infallible heights, he was certainly a great man who at his time stood above and beyond his peers with the capability of moving markets at his very word and battling administrations through his innate character and talent. The very enterprise he engages in is a celebration of the Great Man ethos, even if it is a repudiation of the Randian version.
So is this book a Great Book? Arguably. Read it and find out for yourself.
Grade?
90/100 | A-
Though I started my journey to maturity during the financial crisis, the exact sequence of events have long since fell into the realm of myth for me. Different political groups, different series of economists, and a vast host of pundits competing for my attention (and everyone else's) seized at the opportunity to grab a pulpit and issue commands of truth, only to fall flat or to be contradicted by the next gospel bearer. Greenspan was a name that was said often, but I have to confess to having completely forgotten about him when I picked up the book.
I had expected a book of economics through the funnel piece of a man, but what I received was a biography of a man. Sebastian Mallaby certainly understands the right way to get into my heart with his writing. What follows from the second chapter to the penultimate chapter is the story of one man's life, and a career to be envied. There are many humanizing moments that get put on display, and Greenspan is centered at the heart of American politics. He is treated fairly, perhaps even more fairly than he deserved, at many points in the writing. A decent chunk of this section can be overlong, and as with any long-form biography there is plenty that any individual may want excised from the final version.
Paradoxically, there is a lot this book does not explore, and makes no effort to. While Greenspan's engagement with the administrations were at first emphasized greatly, as well as when it came to wrestling for the independence of the Fed, once the battle was won the administrations appear passive, and their interactions become far less fleshed out. The shift then becomes set up for a house of cards, and that narrative begins to take stride. Little is said of Greenspan after the Crisis, and where he stands now, which could also have proved instrumental. Instead, he simply vanishes in the aftermath of the crisis.
The last chapter of the book details the destruction of Alan Greenspan's career and reputation after his retirement from the Fed during the financial crisis. It is here that the myth of my teenage years comes back to life, and the discussion revived my interest - which had been dangerously close to waning. This is a chapter I encourage people to read, even if they read nothing else, and to draw their own opinions from. Most of us lived through this, and it is from here that the core modus operandi of the book comes into being. The Maestro, the Man who Knew, a near Infallible Being was humbled, but not by the charge laid against him. It has a bit of poignancy, as does the collapse of the era that he had all but carried on his back. Any further judgment is unnecessary, and will only prejudice the person who reaches this point after reading this.
The conclusion/epilogue of the book is in some ways very useful, but at times comes off as trite. Randian Great Men have been an undercurrent of the book, but Mallaby makes the great moral of his text that Great Men don't exist. That American society builds them up in the good times, and destroys them in the bad times. Alan Greenspan's great mistake, the one that makes him "guilty, but not as charged" is that he underestimated the potential for failure in a financial system that he no longer truly understood, and that the system itself was changing beneath him. At times Greenspan understood that the framework he worked under contained flaws, perhaps fatal ones, but never adequately addressed them. Greenspan had some notion of the coming chaos, and did some things to counter them, but had misjudged the direness of the circumstance. He was far from the ideologue that others stated that he was.
However, if I may contribute, Sebastian overreaches when he discounts the idea of great men in his final pages. For though Alan Greenspan was not a mythical great man of infallible heights, he was certainly a great man who at his time stood above and beyond his peers with the capability of moving markets at his very word and battling administrations through his innate character and talent. The very enterprise he engages in is a celebration of the Great Man ethos, even if it is a repudiation of the Randian version.
So is this book a Great Book? Arguably. Read it and find out for yourself.
Grade?
90/100 | A-
September 1, 2018
The Man Who Knew was not the Man Who Acted
Author Sebastian Mallaby’s achievement is to write cogently about the debates that swirled around Central Bank (Federal Reserve) policy from the 1960s through the first decade of the 21st Century, and to provide a revealing profile of a complex and ambitious man. Alan Greenspan was brilliant in many ways and from an early age was an admirer of Ayn Rand’s Objectivist philosophy and a sceptic of the Federal Reserve. But Greenspan was willing to adjust his principles in an unceasing campaign to achieve personal power and influence.
Greenspan’s career maps perfectly with the making of modern finance, which was transformed by the abandonment of the gold standard in 1971, by the deregulation of interest rates in 1980, and then more broadly by globalization, technology, and the creation of new instruments such as derivatives, Measures to regulate the financial system didn’t keep up with the risks attached to these forces, in part due to the difficulty of getting reforms through Congress, the Balkanization of regulation, and the swiftness with which profit-motivated bankers were able to get around regulatory barriers — even those erected in their long-term interest.
Mallaby traces Greenspan’s early years raised by a single mother in humble circumstances, achieving academic distinction in math and economics, becoming an acolyte and forming a personal relationship with writer Ayn Rand, and at an early age achieving success as one of the nation’s most highly compensated economic consultants.
Greenspan became an economic advisor to Richard Nixon in 1968 and was appointed to the White House Council of Economic Advisors — an entree to high level business and government positions culminating in his appointment as head of the Federal Reserve in 1987. Mallaby portrays Greenspan as an exceptionally skilled bureaucratic fighter, besting even such worthy opponents as Henry Kissinger. Despite his early closeness with Ayn Rand, Greenspan was not a committed libertarian but was whatever he needed to be to get wherever he wanted to go.
Greenspan was certainly familiar with the imperfections in market efficiency, having witnessed the 1970s Penn Central bankruptcy, the Latin American crisis of the 1980s, the 1984 collapse of Continental Illinois Bank, and the collapse of Long Term Capital Management in 1995 among other incidents that threatened the US banking system and the nation’s financial stability. Famously, he made references to “irrational exuberance” in the late 1990s.
Mallaby points out that Greenspan’s insight was that interest rates can be a tool used to regulate economic growth, cutting rates to spur growth when the economy is slow and raising rates when growth is overheated and speculation is getting out of hand.
As Greenspan left the Fed Chairmanship in 2006, he acknowledged the central responsibility of the Fed to ensure financial instability and he saw the emergence of the asset bubbles that constituted red flags. But Greenspan trusted the self-correcting forces of the market and underestimated the cost of doing little about excesses in the system. Ultimately and disastrously, he underestimated the significance of the knock-along effects of the securitization that divorced loan decisions from the consequences of holding risky debt.
Tragically, says Mallaby, “The man who knew was not the man who acted.” As the world economy collapsed in the greatest threat to economic stability since the global depression of the 1930s, Greenspan’s reputation went from hero to zero.
Students of economics, particularly of the debates over economic theories and central bank policies, as well as students of bureaucratic warfare as practiced in Washington, will learn much from Sebastian Mallaby’s well written profile. This was a Fed chairman who shaped, and was shaped, by the huge structural changes in global finance of the late 20th and early 21st centuries, and who ultimately was the victim of his own bureaucratic malleability.
Author Sebastian Mallaby’s achievement is to write cogently about the debates that swirled around Central Bank (Federal Reserve) policy from the 1960s through the first decade of the 21st Century, and to provide a revealing profile of a complex and ambitious man. Alan Greenspan was brilliant in many ways and from an early age was an admirer of Ayn Rand’s Objectivist philosophy and a sceptic of the Federal Reserve. But Greenspan was willing to adjust his principles in an unceasing campaign to achieve personal power and influence.
Greenspan’s career maps perfectly with the making of modern finance, which was transformed by the abandonment of the gold standard in 1971, by the deregulation of interest rates in 1980, and then more broadly by globalization, technology, and the creation of new instruments such as derivatives, Measures to regulate the financial system didn’t keep up with the risks attached to these forces, in part due to the difficulty of getting reforms through Congress, the Balkanization of regulation, and the swiftness with which profit-motivated bankers were able to get around regulatory barriers — even those erected in their long-term interest.
Mallaby traces Greenspan’s early years raised by a single mother in humble circumstances, achieving academic distinction in math and economics, becoming an acolyte and forming a personal relationship with writer Ayn Rand, and at an early age achieving success as one of the nation’s most highly compensated economic consultants.
Greenspan became an economic advisor to Richard Nixon in 1968 and was appointed to the White House Council of Economic Advisors — an entree to high level business and government positions culminating in his appointment as head of the Federal Reserve in 1987. Mallaby portrays Greenspan as an exceptionally skilled bureaucratic fighter, besting even such worthy opponents as Henry Kissinger. Despite his early closeness with Ayn Rand, Greenspan was not a committed libertarian but was whatever he needed to be to get wherever he wanted to go.
Greenspan was certainly familiar with the imperfections in market efficiency, having witnessed the 1970s Penn Central bankruptcy, the Latin American crisis of the 1980s, the 1984 collapse of Continental Illinois Bank, and the collapse of Long Term Capital Management in 1995 among other incidents that threatened the US banking system and the nation’s financial stability. Famously, he made references to “irrational exuberance” in the late 1990s.
Mallaby points out that Greenspan’s insight was that interest rates can be a tool used to regulate economic growth, cutting rates to spur growth when the economy is slow and raising rates when growth is overheated and speculation is getting out of hand.
As Greenspan left the Fed Chairmanship in 2006, he acknowledged the central responsibility of the Fed to ensure financial instability and he saw the emergence of the asset bubbles that constituted red flags. But Greenspan trusted the self-correcting forces of the market and underestimated the cost of doing little about excesses in the system. Ultimately and disastrously, he underestimated the significance of the knock-along effects of the securitization that divorced loan decisions from the consequences of holding risky debt.
Tragically, says Mallaby, “The man who knew was not the man who acted.” As the world economy collapsed in the greatest threat to economic stability since the global depression of the 1930s, Greenspan’s reputation went from hero to zero.
Students of economics, particularly of the debates over economic theories and central bank policies, as well as students of bureaucratic warfare as practiced in Washington, will learn much from Sebastian Mallaby’s well written profile. This was a Fed chairman who shaped, and was shaped, by the huge structural changes in global finance of the late 20th and early 21st centuries, and who ultimately was the victim of his own bureaucratic malleability.
Read
January 9, 2022Alan Greenspan was Fed chairman from 1987-2006. Praised as an architect of the "Great Moderation" of stable real income growth and low inflation, his reputation took a real nosedive with the Great Recession of 2007-2008 (fairly or unfairly). This I knew already. I wanted to know more about Greenspan: about his philosophy, his view on Economics, his personality, perhaps even about his personal life. Sebastian Mallaby's book delivered on all of these.
I had not been aware that Greenspan spent decades as a republican policymaker before his time at the Fed. Mallaby fills many pages with Greenspan's personal life - but I think this added something, the reader learning about Greenspan's softer, private side, and how his dislike of personal conflict shaped his policymaking style.
I was left with an impression of Greenspan as transitioning from a libertarian-type ideologue (he was best friends with Ayn Rand of all people!) in the 1950 and '60s, to his views and attitudes being moderated, polished or even corrupted at times by his time in the Nixon and Ford administrations.
Yet I was left thinking that Greenspan was fundamentally sincere in his beliefs. He did as much as any governor, except perhaps Volcker, to stand up to Presidents of either party.
There may be a lesson for posterity here. During his tenure as Fed chair, his pronouncements on what the future would be in great demand and he was assumed nearly oracular abilities. As an Economist I am more skeptical of his 'predictions' and if anything Mallaby was too generous in assessing them. Were they really that good? There is no quantitative assessment to be found in the book; Greenspan may have been wrong as often as he was right and additionally it seems he often hedged his bets.
But his public stature gave Greenspan, and through him the Fed, more power to stand up to presidents, who were always keen for low (nominal) interest rates as this was (rightly or wrongly) expected to bring along high employment numbers and general prosperity. Firing "the man who knew", popular with both Democratic and Republican potentates and apparently trusted by the wider public, could have been risky (his extremely long tenure is consistent with this).
So perhaps central bank heads need to make public pronouncements sometimes, if only to raise their standing with the public. That being said, I think Greenspan went too far, making pronouncements on all sorts of matters better left unsaid, or left to the politicians.
Overall the book strengthened my belief that central banks should be run by bureaucrats, and that having seasoned ex-politicians in charge is dangerous.
I had not been aware that Greenspan spent decades as a republican policymaker before his time at the Fed. Mallaby fills many pages with Greenspan's personal life - but I think this added something, the reader learning about Greenspan's softer, private side, and how his dislike of personal conflict shaped his policymaking style.
I was left with an impression of Greenspan as transitioning from a libertarian-type ideologue (he was best friends with Ayn Rand of all people!) in the 1950 and '60s, to his views and attitudes being moderated, polished or even corrupted at times by his time in the Nixon and Ford administrations.
Yet I was left thinking that Greenspan was fundamentally sincere in his beliefs. He did as much as any governor, except perhaps Volcker, to stand up to Presidents of either party.
There may be a lesson for posterity here. During his tenure as Fed chair, his pronouncements on what the future would be in great demand and he was assumed nearly oracular abilities. As an Economist I am more skeptical of his 'predictions' and if anything Mallaby was too generous in assessing them. Were they really that good? There is no quantitative assessment to be found in the book; Greenspan may have been wrong as often as he was right and additionally it seems he often hedged his bets.
But his public stature gave Greenspan, and through him the Fed, more power to stand up to presidents, who were always keen for low (nominal) interest rates as this was (rightly or wrongly) expected to bring along high employment numbers and general prosperity. Firing "the man who knew", popular with both Democratic and Republican potentates and apparently trusted by the wider public, could have been risky (his extremely long tenure is consistent with this).
So perhaps central bank heads need to make public pronouncements sometimes, if only to raise their standing with the public. That being said, I think Greenspan went too far, making pronouncements on all sorts of matters better left unsaid, or left to the politicians.
Overall the book strengthened my belief that central banks should be run by bureaucrats, and that having seasoned ex-politicians in charge is dangerous.
June 29, 2018
Excellent biography of an ideologue, operator, intellectual, and policymaker - who lived and shaped economic history for the better part of a half century. Provides a window into the economic history of the second half of the 20th century alongside Greenspan's own story. Early on grasped the importance of good data which stayed with him through his career. Began at a time when finance was not considered important - secondary to the goings on in the real economy - and Greenspan started to think of ways in which money mattered (creating inflation contrary to contemporary ideas that bottlenecks/govt spending caused it; boom/bust balance sheet recessions). Interactions with Rand, convincing him to rise above data, forming beginnings of political philosophy.
Early involvement in politics - opposed Kennedy New Frontier economy (fine tuning that caused inflation); drawn to Nixon but quickly opposed to gold / price controls policies. Policy career - early mistakes (gunshy policy post 87 let economy overheat, set stage for 90-91 recession, then shift to harder stance too late); didn't identify balance sheet recession despite his understanding of phenomenon. Bond bubble of early Clinton year's - Fed ended it with little consequence to real economy. Remarkable identification of productivity conundrum - saved economy from unnecessary hikes (policy error) by closely studying data. Lack of political courage later in career - e.g. failing to oppose irresponsible Bush tax cuts. Was there an intellectual justification for low rates in 2000s - given lack of understanding of low inflation and lack of strong belief in New Economy?
Ultimate conclusions - excellent control over price stability but presided over coming disaster in financial stability, and reasons for not tackling this did not convince (Bubbles hard to identify? Central banks impotent to deal with them? Market discipline to be trusted despite evidence otherwise?).
History of the Fed - Volcker transformation (Saturday night special) and rising stature. Overlearning lessons of inflation from 70s in subsequent decades. Emergence of precedents such as TBTF (Continental Illinois bailout). Uncertainty in economics in late 80s at the start of Greenspan's Fed tenure; monetarism discredited but what replaces it - led to pragmatic approaches.
Early involvement in politics - opposed Kennedy New Frontier economy (fine tuning that caused inflation); drawn to Nixon but quickly opposed to gold / price controls policies. Policy career - early mistakes (gunshy policy post 87 let economy overheat, set stage for 90-91 recession, then shift to harder stance too late); didn't identify balance sheet recession despite his understanding of phenomenon. Bond bubble of early Clinton year's - Fed ended it with little consequence to real economy. Remarkable identification of productivity conundrum - saved economy from unnecessary hikes (policy error) by closely studying data. Lack of political courage later in career - e.g. failing to oppose irresponsible Bush tax cuts. Was there an intellectual justification for low rates in 2000s - given lack of understanding of low inflation and lack of strong belief in New Economy?
Ultimate conclusions - excellent control over price stability but presided over coming disaster in financial stability, and reasons for not tackling this did not convince (Bubbles hard to identify? Central banks impotent to deal with them? Market discipline to be trusted despite evidence otherwise?).
History of the Fed - Volcker transformation (Saturday night special) and rising stature. Overlearning lessons of inflation from 70s in subsequent decades. Emergence of precedents such as TBTF (Continental Illinois bailout). Uncertainty in economics in late 80s at the start of Greenspan's Fed tenure; monetarism discredited but what replaces it - led to pragmatic approaches.
January 21, 2023
Certainly, a man who knew... - much much more than others, even if not all. A fantastic biography, as well as, full of extremely vital macroeconomic lessons, especially in the banking sector. From Alan Greenspan's early life, it also spells out what detailed and wide spanning research is needed to become a good investor. The development of thinking among experts over the last century, in the government corridors and central banks, the mutually contradicting concerns and loggerhead battles, are also brought out succinctly for the reader.
It is all too easy to label a man 'all powerful' without actually assuring any decision making power with them (or with actually very limited of it, if any), and blame them after effect for doing too little. It is sad to see a hero actually being pulled down for none of his errors, thus. Whatever happened in 2008-9, the global financial melt down due to the sub-prime mortgage induced crisis, was the fault of many: the greedy home loan scheme sellers who fooled the home buyers, the design and launch of teaser loan schemes, the greed of people seeing others make money out of thin air in the rising housing markets (and, I would add, the missing desire and inability among people to educate themselves financially). It is easy to find a scapegoat sitting, apparently, at the helm of all affairs, whereas, actually, very little is in the hands of any one man, however high is one sitting. IN my opinion, Alan has definitely been celebrated much less than he deserves to be.
The author has presented all facts neutrally. A very strongly recommended book.
It is all too easy to label a man 'all powerful' without actually assuring any decision making power with them (or with actually very limited of it, if any), and blame them after effect for doing too little. It is sad to see a hero actually being pulled down for none of his errors, thus. Whatever happened in 2008-9, the global financial melt down due to the sub-prime mortgage induced crisis, was the fault of many: the greedy home loan scheme sellers who fooled the home buyers, the design and launch of teaser loan schemes, the greed of people seeing others make money out of thin air in the rising housing markets (and, I would add, the missing desire and inability among people to educate themselves financially). It is easy to find a scapegoat sitting, apparently, at the helm of all affairs, whereas, actually, very little is in the hands of any one man, however high is one sitting. IN my opinion, Alan has definitely been celebrated much less than he deserves to be.
The author has presented all facts neutrally. A very strongly recommended book.
August 12, 2018
A decent enough overview of the life of one of the most important economists in US history; however, ultimately the book provides little serious analysis of either its ostensible subject, the life of Alan Greenspan, or its actual main theme, the origins of the financial crisis of 2008. Given the glowing reviews from the Financial Times and the Economist, I expected more. The biographical sections seem pretty boilerplate and the author gives a pretty standard analysis of the financial crisis which merely summarizes the views of various other commentators without providing any new insight or evidence. He mostly succeeds in demonstrating a suggestion which he makes in the Conclusion, in formulating a rejection of the “great man” theory of history, which is that possibly the particulars of Alan Greenspan did not contribute very much to the development of the US economy in the final quarter-century leading up to 2008, which more or less undermines the purpose of writing (or reading) this book. There are also some basic factual errors in the dates of certain events which allude to a broader lack of rigorous analysis and care. I would still recommend the book as an interesting overview of monetary policy in the second half of the twentieth century; also, to a reader with little knowledge of finance and economics it could be informative, though dry.
August 12, 2018
The Man Who Knew offers a wonderful history lesson not just in economics but also US political history and the waters that any true servant in government must navigate. Many times I felt that Mallaby offered solutions of what should have been done, could have been done always looking in the rear view mirror. It's easy to know you should turn right when making the left didn't work. On that score I found his bias a little unforgiving. Greenspan served at a time when there was no internet and then there was; where the world got faster and faster and financial markets continued to increase in complexity at an ever faster rate. It is impossible for a government entity to keep pace. That said, it was a great read of what the US economy faced during his time as Fed Chairman and before, the backstories where you got to see how decisions were made, and the man who navigated some very rough waters.
It was fascinating to read how Greenspan had to navigate the political waters of several Presidential administrations and the pressure that the Fed Chairman faces. In today's world when we read in headlines that the current President is making unusual comments, Mallabys narrative shows that nothing has changed.
All in all a very enjoyable book that I would highly recommend.
It was fascinating to read how Greenspan had to navigate the political waters of several Presidential administrations and the pressure that the Fed Chairman faces. In today's world when we read in headlines that the current President is making unusual comments, Mallabys narrative shows that nothing has changed.
All in all a very enjoyable book that I would highly recommend.
June 8, 2018
Surprisingly compelling take on a powerful guy, who during a lifetime of accumulating power, comes across as someone who spellbinds via detail. Speaking of which, this book is detailed enough to engage readers but not so much that it feels like an economics textbook.
The strength of this book is that it dwells on Greenspan's life, but not to the detriment of a careful treatment of his times. (see subtitle, after all)
I thought Mallaby's rather contrarian conclusions about Greenspan's legacy where compelling. However, his criticisms of the Greenspan interest rate philosophy and obsession with inflation to the neglect of asset bubbles did not leave me fully convinced. While I see Mallaby's point, I couldn't quite come around to it since he takes considerable space mulling over whether the Fed actually has the powers we ascribe to it's magical interest rate levers. But it's a minor criticism.
It's a wonderful book for anyone who would enjoy a read on Greenspan and the postwar economic scene that does not have the terrible echochamber vibe that so much of the economics and politics genre has these days.
The strength of this book is that it dwells on Greenspan's life, but not to the detriment of a careful treatment of his times. (see subtitle, after all)
I thought Mallaby's rather contrarian conclusions about Greenspan's legacy where compelling. However, his criticisms of the Greenspan interest rate philosophy and obsession with inflation to the neglect of asset bubbles did not leave me fully convinced. While I see Mallaby's point, I couldn't quite come around to it since he takes considerable space mulling over whether the Fed actually has the powers we ascribe to it's magical interest rate levers. But it's a minor criticism.
It's a wonderful book for anyone who would enjoy a read on Greenspan and the postwar economic scene that does not have the terrible echochamber vibe that so much of the economics and politics genre has these days.
November 13, 2022
This is one of the best non fiction books I’ve ever read. I learned an astonishing amount about the Federal Reserve. I learned that their mandate was to maintain the fine balance between employment levels and inflation. I learned that financial system instability was a monster that grew over time, and responsibility for it was not directly under their purview - or anyones.
I learned that Alan Greenspan was an insanely smart, analytical, hardworking person with an incredible aptitude for politics, and desire for power and autonomy. The story spans 80 decades, and there were certainly parts that dragged for me (political races and power changes in the 50s - 70s, specifically).
I am so glad that I stuck with this book. I found the author fawning over his subject at first, but gradually the emphasis shifted, evolved, brought you against the subject and then back around. That too was an interesting experience.
Referring to the economy, he said “The real danger is that things may get too good. When things get too good, human beings behave awfully”.
I learned that Alan Greenspan was an insanely smart, analytical, hardworking person with an incredible aptitude for politics, and desire for power and autonomy. The story spans 80 decades, and there were certainly parts that dragged for me (political races and power changes in the 50s - 70s, specifically).
I am so glad that I stuck with this book. I found the author fawning over his subject at first, but gradually the emphasis shifted, evolved, brought you against the subject and then back around. That too was an interesting experience.
Referring to the economy, he said “The real danger is that things may get too good. When things get too good, human beings behave awfully”.
February 18, 2024
Clearly a very well researched book, with a measured conclusion about Greenspan's legacy. The beginning of the book, covering his early career and entanglement with Rand, is particularly interesting, while towards the end it mostly becomes a rote play-by-play of FOMC meetings - reflecting Greenspan's fundamentally quite narrow focus and analytical character. The book taught me that Greenspan is actually more of a docile conformist than I expected, and in practice it seems he had very limited power outside of the narrow domain of short-term interest rates. This is a disappointing lesson, and the main reason I'm rating the book 4 stars.
One thing to be aware of is that the author is quite focused on interpreting Greenspan's actions through the lens of the 2007/2008 financial crisis. I found this didn't give him enough credit for his pre-crises performance, but maybe the focus is justified - for many people, the crisis could be seen as the moment that shattered Greenspan's hithero immaculate reputation.
One thing to be aware of is that the author is quite focused on interpreting Greenspan's actions through the lens of the 2007/2008 financial crisis. I found this didn't give him enough credit for his pre-crises performance, but maybe the focus is justified - for many people, the crisis could be seen as the moment that shattered Greenspan's hithero immaculate reputation.
May 16, 2017
This book is jampacked with research, and yet still finds a way to convey the main subject on a deeply personal level. The most fascinating part to me was the way his ideology developed and changed over time, and how he learned to work with people of all backgrounds in Washington, frequently by using tactics to avoid or downplay confrontation (great tidbits on Nixon also). The man who began as an Ayn Rand acolyte slowly became more understanding of government intervention (but probably not enough). Of course, his legacy is impacted by the lead up to the Great Recession. The author is not unfair in assigning blame to Greenspan but also reminds the reader of his accomplishments. He points out that Greenspan was never really the person that would challenge authority, but rather there to gently guide authority in the direction he found most prudent. But in the case of the recession, he did neither.
May 14, 2020
Another winner. As a teenager I remember watching CNBC during the 1990’s and the host eagerly anticipating greenspan’s testimony about something financial. I never could figure out what he was actually saying. He’s a mysterious guy. Some things learned in this tome:
1. Supply side tax cuts are bogus. You can’t cut taxes and expect to take in more revenue because people have more money to spend. It’s false. Math does not work out. Jack kemp, shame on you.
2. The dot com bust was interesting to read about and how Alan seemed to be out to lunch on interest rates again.
3. The housing crisis. Oops Alan. Missed that one too.
4. Finally his relationship with ayn Rand was interesting. Might have to pick her work up and see if I can read any of it.
Good book. Interesting man. Well written.
1. Supply side tax cuts are bogus. You can’t cut taxes and expect to take in more revenue because people have more money to spend. It’s false. Math does not work out. Jack kemp, shame on you.
2. The dot com bust was interesting to read about and how Alan seemed to be out to lunch on interest rates again.
3. The housing crisis. Oops Alan. Missed that one too.
4. Finally his relationship with ayn Rand was interesting. Might have to pick her work up and see if I can read any of it.
Good book. Interesting man. Well written.
July 12, 2018
I liked this book at the start. The writer has a clear, natural style that makes the book easy and enjoyable to read. Unfortunately it quickly became apparent that he prefers to tell rather than show. He laces his descriptions of Greenspan’s various opinions and positions and decisions (as they evolved through his life) with lazy adjectives like “crude” and “naive” and “dogmatic”. These descriptions are assumed obvious and the author seems to think the reader should just accept them as authoritative and the correct account or interpretation simply on the author’s authority. It’s an unskillful way to write and quickly became too tiresome for me to tolerate. I withdrew my attention and stopped after reading about one-third of the book.
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December 17, 2019Did not finish the entire book.
The book was split into three parts: first part was about Greenspan's "youth" (his childhood, 20s and 30s), not sure about the second part (skipped it entirely), the third part was his twenty years as Fed chairman (his 60s). Read the first and third part.
The first part covered his beginnings. Basically, Greenspan was an academic genius that completed his PhD, wrote a bunch of papers that got him recognized in the economics fraternity and became a partner at a consulting firm by his early 30s.
The third part talked about some of the significant economic crisis such as the S&L crisis, dot com bubble and the Kuwait War etc. Under Greenspan, reducing inflation was their main goal and was achieved through one method which was monetary policy.
The book was split into three parts: first part was about Greenspan's "youth" (his childhood, 20s and 30s), not sure about the second part (skipped it entirely), the third part was his twenty years as Fed chairman (his 60s). Read the first and third part.
The first part covered his beginnings. Basically, Greenspan was an academic genius that completed his PhD, wrote a bunch of papers that got him recognized in the economics fraternity and became a partner at a consulting firm by his early 30s.
The third part talked about some of the significant economic crisis such as the S&L crisis, dot com bubble and the Kuwait War etc. Under Greenspan, reducing inflation was their main goal and was achieved through one method which was monetary policy.
This entire review has been hidden because of spoilers.
May 15, 2017
An excellent, lengthy biography of Greenspan that, even for someone with only a passing knowledge of economics, will remain interesting for the most part as Greenspan's experiences as a musician, in politics, his relationships with women and with Ayn Rand are all addressed in detail in the book.
If I hold anything against Mallaby, its the excuses he offers for Greenspan's behaviors & policies that helped lead the US into the economic crisis 0f 2008. The author has obviously spent a lot of time in Greenspan's world (as the length of the book shows) and in the end he does what he can to protect Greenspan from being seen as one of the enemies of the era for what happened.
If I hold anything against Mallaby, its the excuses he offers for Greenspan's behaviors & policies that helped lead the US into the economic crisis 0f 2008. The author has obviously spent a lot of time in Greenspan's world (as the length of the book shows) and in the end he does what he can to protect Greenspan from being seen as one of the enemies of the era for what happened.
July 21, 2022
A pretty monstrous book which I think would be a struggle for anyone not particularly interested in finance and reserve banks. I realised about 2/3 of the way through this that I was not one of them.
I did think there were some interesting commentaries on how the politics of a time influence the monetary policies, something we would normally consider to be relatively objective. It was also fascinating to read that although the big dawgs at the Federal Reserve think they know what causes inflation, they are not 100% sure. Think about that the next time you hear the logic behind an interest rate hike.
All in all, definitely not for everyone, and I skimmed the final chapters.
2.5/5
I did think there were some interesting commentaries on how the politics of a time influence the monetary policies, something we would normally consider to be relatively objective. It was also fascinating to read that although the big dawgs at the Federal Reserve think they know what causes inflation, they are not 100% sure. Think about that the next time you hear the logic behind an interest rate hike.
All in all, definitely not for everyone, and I skimmed the final chapters.
2.5/5
January 26, 2024
One of my all time favorite biographies. As J. Bradford DeLong said, the history of the 20th century is economic history - and there’s no one who embodies the history of the second half of the 20th century more than Alan Greenspan.
“One of the virtues of biography is that it allows readers to understand decision-making as it really is - imperfect improvised contingent upon incomplete information and flawed human nature.”
“Systems of public administration that presume the existence of omnipresent saviors will inevitably fail in the cycle will then turn in the Superman will be condemned bitterly American political culture adore leaders, but it is merciless when they fall short.”
“One of the virtues of biography is that it allows readers to understand decision-making as it really is - imperfect improvised contingent upon incomplete information and flawed human nature.”
“Systems of public administration that presume the existence of omnipresent saviors will inevitably fail in the cycle will then turn in the Superman will be condemned bitterly American political culture adore leaders, but it is merciless when they fall short.”
July 19, 2018
Sebastian Mallaby’s, “The Man Who Knew: The Life and Times of Alan Greenspan” is part biography and part United States economic history lesson. While the book is a long read, the author does a good job of interweaving Alan’s personal and professional lives. Since Greenspan is a contemporary figure, I really enjoyed reading about events that I remembered happening. It helped to shine a light on some old memories.
If you are interested in Alan Greenspan or United States recent history and economics, then give this book a read. You will learn something new.
If you are interested in Alan Greenspan or United States recent history and economics, then give this book a read. You will learn something new.
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