本书前半部实际上跟踪了作者从政期间美国经济和货币政策的发展，如果不能理解则影响全书理解。以下是我整理出的关键章节脉络，供参考。
Lydon B. Johnson (1963-1969). Johnson escalated involvement in the Vietnam war; defense expenditure rose to 15% of GDP and deficit surged; levied a 10% surcharge on income taxes to finance budget deficit.
Chapter 3 Economics Meet Politics
Richard Nixon (1969-1974.8). In the summer of 1968, Greenspan served Nixon as his coordinator on domestic policy in the nomination campaign. He also served as a corporate director in Alcoa, J.P. Morgan, etc.
He witnessed 1970’s stagflation: 1970 unemployment rate 6%, inflation rate 5.7%, added up to a ‘discomfort index’ as high as 11.7%; indexed social security to inflation; adopted wage and price control measures but failed. 1973 inflation was 11%; 1974 consumer spending decreased and business investment almost froze. Nixon administration promulgated Wipe-Inflation-Now (WIP) policy, asking enterprises to pursue voluntary price control.
Henry Ford (1974-1976). Shift policy priority to ‘curbing inflation’; deregulation; Alan Greenspan became CEA chairman 1974-1976. To decide whether it was mild inventory liquidation or recession, Greenspan developed a weekly version of GNP; used restrained stimulus via one-off tax rebate to families; Oct1975 GNP recovered to expand fast; Q1 1974 GDP grew by 9.3%, Q2 1974 GDP grew by 2%.
Chapter 4 Private Citizen
Jimmy Carter (1977.1-1980). Set up incompatible policy targets, and adopted compromised measures countering inflation; nominated Paul Volcker in 1979 as the Chairman of Federal Reserve Board; Volcker changed the operational target of monetary policy from short-term interest rates to monetary base, a harsh medicine in curbing inflation. Volcker passed 1979-1983 as his first term, and 1983-1987 as his second term (quit under Regan administration), pushing US into brutal recession in early 1980’s by raising interest rate to record high level (20%). Unemployment rate rose to 9% in mid-1980, 11% in late 1982, not assuaged until 3 years later. Inflation by 1978.1 was 6.8%, by 1978.6 was 7.4%, by 1978.12 was 9%, and by 1979.12 was 12% (oil crisis).
Chapter 5 Black Monday
Ronald Regan (1980-1988). On June, 1987, President Reagan nominated Greenspan as a successor to Paul Volcker as chairman of Federal Reserve, and the Senate confirmed him on August 11, 1987. 1987 stock market froth, +40% annually. National debt to public rose to $2 trillion in 1988 from $200 billion in 1980.
As inflation seemed returning (1986: 1.9%; 1987:3.6%), Greenspan raised discount rate in 1987.8 but triggered a stock market panic, consummated in a 22.5% one-day plunge of Dow Jones. By providing extra liquidity to market, confidence recovered soon and GDP growth was 2% 1Q1988, and 5% 2Q 1988.
Chapter 6 The Fall of the Wall
George H. W. Bush (1988.9-1992). ‘No new taxes’ promise; delegated economic affairs to cabinet including Nick Brady (Treasury Secretary), Dick Darman (Budget Director), Mike Boskin (CEA chairman). Gulf war 1990 led to oil price shock and hurt consumer confidence badly, leading to a short recession. Slow recovery began since early 1991. By 1988, average annual deficit had been over $150 billion per year for 5 year run. Deficit hurt Bush re-election campaign though a healthy GDP growth by 4% in Q1 1992. The annual GDP in 1992 grew 4.1%
Chapter 7 A Democrat’s Agenda; Chapter 8 Irrational Exuberance; Chapter 9 Millennium Fever
Bill Clinton (1992-2000). By 1993.12 GDP growth was strong at 5.5%. The Fed took preemptive move by raising rate from 3% to 3.25% to dampen inflation expectation. Continued to raise rate until to 5.5% by end of 1994. Soft landing was achieved in 1994. GDP grew by 4%, and inflation was kept under 3% for 3 years running. Clinton committed to a deficit cut program by $130 billion per year 1993-1997. Y2K issue.
1994 Mexico short-term debt and Peso devaluation triggered a crisis. $25 billion government debt was due but Mexico only had a dollar reserve at $6 billion. US Treasury provided $30 billion + IMF $20 billion package to Mexico (mainly in form of short-term loans.) to ease the market (‘to pile money on the window’). It turned out Mexico only used a fraction of the facility and repaid quickly once the crisis was over. Actually US profited by $ 500 mm from those loans.
1995 Netscape IPO. Dow Jones +30% in 1995. ‘Wealth effect’ but its latitude was subject controversy. On corporate side, more expenditures on plant & equipment due to stock boom. Greenspan cited quite a few examples of capital shifting and creative destruction in history. By analysis, information technology released extra inventory and backup workers for more productive uses, which led to higher productivity.
Unemployment rate in 1994 was 6%, 5.6% in 1995, 4% in 1996. GDP growth was 6% in 1996. Facing the judgment if productivity really improved. Phenomenon: companies purchase on desktops and networks; companies reported rising operating profit margins without raising prices; scrutinized federal productivity statistics with their underlying data & concluded that productivity did rose. Decided to keep rate low by 5.25% in 1996.9, by 1997.3 raise it to 5.5%, and remained 5.5% for 4 years until 2001.
Chapter 10 Down Turn; Chapter 11 The Nation Challenged
George. W. Bush (2000-2008). On May 18, 2004, Greenspan was nominated by President George W. Bush to serve for an unprecedented fifth term as chairman of the Fed.
Greenspan's term as a member of the Board ended on January 31, 2006. Ben Bernanke suceeded him.
In Jan2001, predicted $5.6 trillion surplus over 10 years, which predictably would reduce federal debts. Break down of the $5.6 trillion: $3.1 trillion was untouchable and ring-fenced for social security and Medicare expenditures; $2.5 trillion usable fund was under controversy. Greespan preferred to reduce debt. Federal debt to the public was $3.4 trillion, among which $1 trillion was considered irreducible, while $2.5 trillion was considered reducible. Also wished to reform the current social security system. When Bush administration and the congress proposed a tax cut, Greenspan advocated to add in a ‘trigger’ in such cut. As the surplus rose soon, predicted to pay off all the reducible debt by 2006, from then on accumulated surplus would have to be invested to private market, which was un-favored by free-market believers. Instead, Greespan preferred to phase out surplus through a combination of tax cut and social security reform. Bush eventually had his tax cut plan passed with Congress at $1.35 trillion.
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