Maestro: Not so sure

He had been the darling of the media - for much of the 90s and even recently. He is known as the Maestro - for his skillful handling of the US Monetary policy. He is the venerable Alan Greenspan.

I think he is a brilliant economist of all times. And a top notch Fed chairman too. And he is most well known for his 'irrational exuberance' comment. He was dead on. Except, the market did not tank after that comment. So, he too was more guarded later on. No one, apparently, even the Fed chairman wants to second guess the wild beast - aka, the Market.

My point is not to take any credit away from him. But to dispel the mystique about him.

Wall Street Journal always pointed out that the Fed uses trailing indicators and is always using its monetary policy in a reactive mode. It had warned repeatedly in and after 2003 that the Fed easy money policy will lead to huge problems in the future. And their analysis was simple. They were looking at forward looking indicators - dollar and gold.

Fed, although independent, is not immune to political pressure. And this is essentially what has led to this sorry state of affairs right now. And the media circus too. He reveled in that.

Poor Bernake had to inherit this mess. And also to live up to this out sized void of Greenspan. Not an easy task.

He was right in wanting to include Food & Energy back in the Core Inflation indicator. Any one but an economist can think of a 'Core Inflation' indicator without Food & Energy. Isn't that what people use and measure their well being based on that?

However, Bernake would not be able - at least at this time, to modify core inflation indicator. Political pressure is too great. It also happens to be an election year.

So, in conclusion, Greenspan deserves some weighted blame for the current mess in our markets. Maestro - not quite.