The wisdom of the aged

The inestimable Peter Drucker on Alan Greenspan:

“The Alan Greenspan of the 1920s and 1930s was Montagu Norman, the governor of the Bank of England. He had the same reputation as Greenspan has now. But he lost it with the Depression, the same way Greenspan will lose his. The idea that the Federal Reserve chairman has power is a delusion. The only power he has is over the interest rate, and the interest rate has ceased to be important because businesses are no longer dependent upon borrowing from banks. The interest rate is only important to the stock market, to people that short or buy on margin. For the economy — yes, if it goes up to 18% or down to 2%, but half a point is a symbolic gesture. The Fed has control only as long as people trust that when Greenspan opens his mouth, it is meaningful. But the first time it does not work — well, magicians get no second chance.”

Peter Drucker was the author I read most voraciously during my intellectual formative years. I haven’t read anything of his in over a decade, since I basically lost interest in the boring world of normal business once I entered the game industry. But it doesn’t surprise me that such an incredibly astute mind would instantly see through the Grand Charade and the Master Charlatan.