Greenspan: We Don't Know How Fed Policies Will Work

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July 30 (Bloomberg) -- Former Fed Chair Alan Greenspan discusses central banks' monetary policies on “In The Loop.” (Source: Bloomberg)

Monetary policy, you said you don't speak about that.

The word measured is closely associated with the greenspan fed.

Of what did you learn from the challenging outcomes of measured?

If you were to advise janet yellen, what would you say about when the punch bowl is taken away, should they get more restrictive?

None of the central banks have ever been anywhere near where we finally owe our -- where we have to move as a consequence of the crisis.

What we do not know -- we can guess -- we should not parade it is some great intellectual insight -- we just do not know how this thing is going to work out when we begin to tighten.

We should tighten.

When you are lessening the tapering, so long as there is tapering going on, the implication is that the amount of increased reserve balances has not gone to zero.

We are still expanding.

We have not yet gotten to the point where we can stop and turn around.

You never close up the market reaction.

Do we need to get out our history books?

And be more abrupt and aggressive when we go back to neutrality or to a restrictive policy.

Or did you find a lot of value in a measured approach?

I learned a lot.

When i got into the federal reserve in 1987, i never considered myself somebody who is an expert in monetary policy.

I evolved over the years.

What i find very interesting -- this new legislation which was supposed to match the rule that came out recently, it was originally an eager metric analysis of what the fed was doing -- ecometric analysis of what the fed was doing since 1993. i would think, if we could replicate that in some form or another, that is the way we should be functioning.

The problem is going from where we are now with inflated balance sheets which require unprecedented procedure -- we won't get back to the point where we have a normalized monetary policy.

That is the critical question.

It will be an experimental issue.

It will be very tough.

That's right.

We are in no man's land right here in terms of how that will play out.

You also mentioned how we are playing with thinner margins here.

There is not the big margin of safety that we had a decade ago.

Given that, what happens if it

This text has been automatically generated. It may not be 100% accurate.


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