Let's Argue about the Fed

Every morning about 9:30, BusinessWeek editors gather in New York to review the overnight news and our story lineup. Because we are a broad business magazine, our interest can range from Microsoft Corp. to Tomb Raider. But there is always one constant: the economy.

Whether it's about China, Europe, Wall Street, or Alaskan oil, the debate almost always swings back to: How does all of this fit into the global economic picture? More often than not, that debate then focuses on the Federal Reserve Board. No surprise there. It's the same concern in thousands of offices around the world--where everybody, it seems, has an opinion about Alan Greenspan & Co.

In our shop, however, the views bounce back and forth among three groups of seasoned Fed watchers. On one side are Jim Cooper and Kathleen Madigan, who write our widely read Business Outlook column. Across the table is Mike Mandel, an economist who pioneered coverage of America's New Economy, and his colleague Peter Coy. In the middle are two Washington pros, Rich Miller and Laura Cohn.

Miller, who has covered central banks and financial markets in London and Tokyo as well as from Washington, and Cohn, a Fed specialist, try to decipher the inside of the Fed for editors eager to challenge their reasoning. I'm told that in other lines of work people can get this impassioned over ball scores or even baud rates. We work up a lather over basis points.

So how do we reach a conclusion? The answer is, very carefully. Cooper and Madigan start their research for the next issue as they are closing their weekly column. We "look for a defining trend, and then see if it holds," says Jim. Both spend long, strange hours poring over reams of data downloaded from around the world.

If that sounds a little Greenspanish, it may not be a complete accident. Cooper, like many other veteran economic journalists, has been trading views with the Fed chairman for more than 25 years. Madigan started her career at Greenspan's New York economic consulting firm. Their view of the economy is relatively positive.

Mike Mandel and Peter Coy use an eclectic approach that leads them into a thicket of New Economy analysis, where the rate of innovation and the vagaries of the Silicon Valley job market provide important clues. This outside-the-box thinking convinced Mandel in 1995 that a more productive, tech-driven business cycle would allow the U.S. to grow at a 3%-to-3.5% rate without igniting inflation. But as U.S. growth began to roar, Mike also warned that the volatile tech sector of the New Economy could bring the U.S. and global economies down hard. His Cover Story, "The Next Downturn" (BW--Oct. 9), based on his book, The Coming Internet Depression, correctly foreshadowed the tech bust of 2001. Mike thinks the Fed should continue cutting rates aggressively.

The debate, of course, never ends at U.S. shores. Brian Bremner, our Bank of Japan specialist in Tokyo, and David Fairlamb, who covers the European Central Bank from Frankfurt, each day contribute to the rich brew of ideas that drive our coverage. We think our morning debates sharpen the arguments--and sometimes turn up something very new. Hope you agree.

By Bob Dowling, Managing Editor International

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