Fear – of Greenspan

J.D. Foster / October 07, 2010

If economic sages were judged the same way major league baseball hitters are, Alan Greenspan hitting .333 would deserve the attention he garners. In recent months the former Federal Reserve Board Chairman struck out badly twice on what in economic terms could be considered batting-practice fastballs. But in today’s at-bat, a persuasive column in the Financial Times, the old Maestro finally connected.

As Greenspan observes, “Fear Undermines America’s Economy.” Fear of inflation. Fear of deflation. Fear of higher taxes. Fear of generalized governmental foolishness.

Uncertainty, of course, is inherent to the economy: Uncertainty about a new product offering, uncertainty about market shifts and trends. What drives an economy forward or holds it back is how businesses view uncertainty and how they react to it. As Greenspan notes, American businesses today react in fear and their reaction is to stand pat. (more…)