Alan Greenspan plans on retirement in January, 2006, bringing a crisis in itself. It is not the loss of his leadership, which has been steady through the years, but the fact he will have to present a Farewell speech. This Speech will necessitate an evaluation of the fiscal state of the American economy from the start of his Chairmanship to its conclusion. It will have to include an evaluation of future prospects. Greenspan must be in hard contemplation as to what he can say without destabilizing the Markets.
Most People offer Ben Bernacke's chances to the Chairmanship to be a long-shot. The fact remains that Bush cannot nominate one of his Cronies (Bush program supporters), not with a Federal Deficit greater than the entire Federal Budget in the early 1960s. Bush must find someone outside his political umbrella, and the only one with stature sufficient is Bernacke. This still leaves the problem of Greenspan's Farewell Speech.
Greenspan will have to criticize the Bush Tax Cuts, which did not enhance economic performance, led to American Corporations to offshore Production to maximize Profits left untaxed, and created the huge Deficits in Government spending and Current Accounts. He will have to condemn excess Defense Spending, which was not geared towards Counterterrorism, but to the issuance of huge R&D Corporate Contracts to protect Bush's political base. Greenspan will not directly refer to Iraq and Afghanistan, but will need to criticize the expanse of American military commitments Overseas. He must also slight the Bush failure to support the Dollar, hammer the extreme expansion of Welfare payments through the passage of the Proscription Drug law and Education law, and condemn the Private Accounts formula for Social Security, Health, and Savings because of detrieous expansion of a Stock Market balloon. The Speech will not be comfortable for Bush, the Fed, or Greenspan himself.
Bernacke, or whoever the next Chairman will be, must present a Inagural Speech immediately condemning the rapid expansion of Financial Paper instruments, currently hiding the true impact of Inflation; this through draining Consumption Dollars into declining P/E ratios 401ks, Koughs, IRAs, and Business tax credits. This Speech will necessitate mention of the Current Accounts deficit, and the need for intervention to forestall growth in the deficit. It should mention Bush Budget manuevers understate the Federal Deficit by approximately $200 billion a year, and this amount will only increase unless Government spending decreases. It will contain numerous other critical elements of Bush policy, and will not heighten amiable relations with the White House.
A financial Crisis is approaching American shores, much of it manufactured by poor Executive policy. It is not especially worrisome to Americans, nor should it be; it is something which will have to corrected. Leadership in this Correction cannot be expected from either White House or current Congress, so American financial institutions will have to take the forefront in the Crisis. The next Chairman of the Federal Reserve will need to express the knowledge and toughness shown by Alan Greenspan in his tenure. lgl