Bob Woodward of The Washington Post, famous for breaking the Watergate scandal, called former U.S. Federal Reserve Chairman Alan Greenspan "the maestro" in a book published in 2000. It was a tribute suggesting that, much like an orchestra conductor harmonizing dissonance, Greenspan fine-tuned the money supply and interest rates to lead the U.S. economy into a prolonged boom. Interestingly, Greenspan majored in clarinet and saxophone at New York's prestigious Juilliard School and even performed in a jazz band called the "Henry Jerome Orchestra." But with his exceptional talent for handling numbers, he studied economics at New York University and completely changed the course of his life.
Greenspan, who passed away on the 22nd of this month at the age of 100, served as Fed chairman for 18 years and five months, from August 1987 under President Ronald Reagan until January 2006, just before the global financial crisis. As his remark "If I seem unduly clear to you, you must have misunderstood what I said" suggests, he favored an ambiguous style of speech during his tenure, so much so that it was dubbed "Greenspeak." The intent was likely to avoid giving unnecessary shocks to the market. Particularly famous is "irrational exuberance," a phrase he uttered at a 1996 American Enterprise Institute (AEI) dinner. This warning, aimed at the dot-com bubble, remains a pointed aphorism cautioning against human greed and herd mentality that is still quoted today.
Global stock markets continue their upward rally amid the artificial intelligence (AI) frenzy. But as volatility grows like a roller coaster, wariness toward theories of an AI bubble is also rising. While excessive optimism or pessimism is to be avoided, one must not forget that irrational exuberance has always come back as a harsh bill. Amid inflation concerns, the European Central Bank (ECB) and the Bank of Japan (BOJ) have recently shifted into tightening mode. But the situation is growing complicated, with international oil prices falling back to pre-war levels following the agreement to end the war in Iran. Attention is on the choices of Kevin Warsh, the new U.S. Federal Reserve chairman, and Shin Hyun-song, the new Bank of Korea governor, both of whom took up the baton this year. Once you take up the baton, no mistakes are allowed. It remains to be seen whether these new conductors can truly become the new maestros.
