This is about the power of one 81-year-old man. Global markets had dropped like a stone when Alan Greenspan made his famous comments about “irrational exuberance” in 1996. He was then chairman of the US Federal Reserve and hence the most powerful man in the world economy.
But it seems that traders hang on to every oracular word he pronounces in re- tirement as well. First, he said on 27 February that a US recession was possible in 2007. The markets stumbled. They had barely picked themselves up when Green- span was at it again. He said on Tuesday that there was a 30% chance of a recession.
Traders hit the sell button again. The issue here is not the validity of his forecasts, but why people from Shanghai to Seattle take Greenspan so seriously. Behind it is credibility built over 17 years at the Federal Reserve. This is something that our ministers who are trying to talk down commodity prices should realise, but will not.