The Greenspan Effect: Words That Move the World's Markets

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9780071349192: The Greenspan Effect: Words That Move the World's Markets

The United States Federal Reserve System has played a key role in U.S. economic affairs since it was established in 1913. Still, it has never enjoyed the unprecedented power and influence it wields today over global financial markets.

The reason? Alan Greenspan. Greenspan first gained attention when he stopped the 1987 market crash in its tracks, propelling the U.S. economy into its longest period of uninterrupted growth in history. But it was in a speech the evening of December 5, 1996, when Greenspan's words truly revealed their unprecedented powers. When his seemingly innocuous comment about the sky-high stock markets--"How do we know when irrational exuberance has unduly escalated asset values?"--hit global wires, world markets immediately plunged as much as five percent. The next morning, with Greenspan's warning on every New York trader's lips, the Dow immediately dropped two percent. To reeling traders, the dollar value of understanding Greenspan--and the instantaneous effect his speeches would have on markets--became clear.

THE GREENSPAN EFFECT recalls these and other Greenspan episodes in the most honest, dependable words available--Greenspan's own. Excerpts of his speeches from 1987 to the present are followed by expert analyses of those speeches, and nuts-and-bolts reporting on global financial reactions. This up-close examination of Alan Greenspan's tumultuous regime discusses his early career, and how he developed the bottom-up analytical approach that is today his hallmark at the Fed. It shows how, unlike the politicians who appoint him, Greenspan has never allowed political distractions or personal foibles to interrupt his chosen course. By focusing on AlanGreenspan's public pronouncements as Fed chairman, THE GREENSPAN EFFECT provides a concise, accurate distillation of Greenspan's thinking on today's most important economic topics. It presents an historic, solidly researched overview of how these pronouncements have affected Wall Street and other world financial markets. In so doing, this immensely valuable profile equips investors and businesspeople with today's most important tool--an analysis of how Alan Greenspan has responded in past economic environments, what he is likely to do in the future, and how financial markets will react.

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Review:

The son of a stockbroker and himself a one-time swing-band musician, Federal Reserve chairman Alan Greenspan has incontrovertibly turned his formerly anonymous presidential appointment into the single most dominant financial position on earth. Whenever he prepares to speak, fiscal agents around the world hold their collective breaths--and then react emphatically to his words, often even before he finishes saying them.

But exactly what does he say that so affects money management? And precisely why does he say it? David Sicilia and Jeffrey Cruikshank, consultants and previous collaborators, do a formidable job of answering both questions by analyzing the chairman's own statements in The Greenspan Effect. The result is an insightful point-by-point assessment of the man and his enormous influence. From critical utterances like those in his famous "irrational exuberance" speech (which sank the markets after he delivered it in 1996) to uplifting phrases such as "oasis of prosperity" (which boosted them when he used it in 1998), they're all examined according to the way they affect and are affected by interest rates, inflation, labor, banking, global economies, and other factors. Perhaps most useful is the penultimate chapter, which offers 16 principles of Greenspanology, such as "It's always about interest rates" even though he "hardly ever talks about interest rates," designed to guide those who "navigate the often troubled waters onto which Greenspan pours his rhetorical oils, or into which he introduces new turbulence." --Howard Rothman

From the Back Cover:

The first unvarnished analysis of the true meaning behind Alan Greenspan's words. Alan Greenspan--the inimitable Chairman of the United States Federal Reserve System--can send financial markets around the world crashing with a comment, or build fortunes just as quickly. Yet he is largely inaccessible and little understood by investors, policy-makers, and the broader public. Who is Alan Greenspan? And how can investors predict, with any degree of confidence, the effects his pronouncements will have on global financial markets? The Greenspan Effect cracks the code.

This complete analysis of the writings and speeches of Greenspan throughout his tumultuous regime, and how they have affected financial markets, will help investors understand which words matter, which words don't, and how to separate meaningless rhetoric from market-moving signals. It offers an in-depth explanation of the incomparable Greenspan phenomenon, anticipating how he will think about--and act upon--tomorrow's most pressing financial topics. Most important, it encapsulates Greenspan's thinking on a broad round of key economic and social issues, and provides a revealing analysis of how he has impacted, and will continue to impact, world financial markets.

Get an invaluable short course in the science of "Greenspanology"--one which will help you understand Alan Greenspan's future speeches and their impact on world financial markets--in The Greenspan Effect.

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