Economists Powell, Caputo and their application of the Greenspan rule

Former Federal Reserve Chairman Alan Greenspan shared a story about the importance of clear communication in policy making, especially when it comes to dealing with prices. He believed that economists’ words were overrated and that transparency in monetary policy was crucial for investors, companies, and savers.

Greenspan rejected the proposal to adopt an inflation targeting scheme, which would have made monetary policy more transparent but also less effective in controlling prices. Instead, he advised his colleague not to go on television or speak at his former university if he had to say anything.

Similarly, the government of Javier Milei seems to be facing a dilemma with their stabilization plan. While they have based it on a fiscal announcement, some of their moves are contrary to their campaign speech and lack clarity in reaching their objectives. This lack of transparency has caused confusion and uncertainty in the market.

The same issue is being faced by economic officials in Argentina who are following the Greenspan rule of “going but not saying anything” in their public appearances. This lack of communication has led to speculation and uncertainty in the market.

In conclusion, Greenspan’s advice serves as a cautionary tale for policymakers about the importance of clear communication and transparency in policy making. The power of words should not be underestimated as it can have a significant impact on the economy. Policymakers should ensure that their public statements are clear, convincing, and transparent to avoid confusion and uncertainty in the market.

By Editor

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