Alan Greenspan, the longest-serving chairman of the American Federal Reserve (Fed) from 1987 to 2006, died at the age of 100, leaving behind a global economy structured on permanent debt and the expectation of continuous state rescue.
The man who began as an uncompromising advocate of the free market ended up turning central banks into the ultimate risk insurers of the system, giving rise to the notorious “Greenspan Put”.
His strategy, based on the belief that the Fed would always intervene to contain market declines, radically changed the planet, encouraging excessive risk, leverage, and the creation of bubbles.
The reversal
Greenspan’s course began in 1987, when he took the helm of the Fed following a proposal by Ronald Reagan. Influenced by the philosopher Ayn Rand and her positions in favor of economic freedom, he observed early on the dramatic rise of international financial flows, mainly Arab petrodollars.
Noticing that these flows were three to four times higher than international trade in goods and services, he identified in the financial market an extremely rapid factor of wealth production without the need for fixed investments or labor. This finding overturned traditional economic theory and became the leading engine of growth of his era.
The limits
As a central banker, from 1990 he sought to promote a self-regulating market on a global scale, while underestimating the ideological influence of statism. His faith in self-regulation was severely tested by the 2008 crisis, when he himself admitted that he had fallen victim to “shock and disbelief,” discovering the clear limits of his model.
Before his tenure, debt was merely a tool and markets worried about recession. After Greenspan, debt was transformed into a dominant economic model and investors became addicted to the idea of permanent banking rescue.
New era
This “Civilization of Credit” created a world of cheap capital, inflated assets, and a constant need for liquidity in every new crisis. This endless pursuit of liquidity and the need to manage it led, according to economic analyses, even to the emergence of Artificial Intelligence, which now constitutes the new source of crisis management.
Within this new, fragile environment, cryptocurrencies appear as an additional enormous risk of overturning the traditional monetary order, sealing a world that Greenspan changed forever, but is no longer present to see.