American Notes: the Economy

When the chairman of the Federal Reserve speaks -- especially in the midst of a prolonged recession -- people listen. Last week Alan Greenspan had the ears of Washington and Wall Street peeled during Senate hearings on his confirmation to a second term (all but a foregone conclusion). Greenspan defended the go-slow policy in reducing interest rates to revive the economy. He also warned against a bidding war between the White House and Congress to see which could make the deepest tax cut.

Wall Street didn't like everything it heard, especially Greenspan's implicit suggestion that no more rate cuts are in the offing. The stock market plunged 47 points Wednesday -- and finished the week down 9 points -- in reaction to more bad news: the economy barely grew during the fourth quarter, inching up only 0.3%, while the index of leading economic indicators dipped 0.3% in December. Despite evidence of a "triple dip" recession, an optimistic Greenspan testified that he detects some "very subtle" signs of economic recovery.