Mobs, Messiahs, and Markets

Wreck of the Tech

Press reports said that the most powerful man on the face of the earth—indeed, more powerful than any asleep in its bowels, too—spent an hour in the tub every day.

Perhaps, were it not for its womblike comfort, he might have panicked, for he must have realized that over the first 13 years of his reign he had created the biggest debt bubble the world had ever seen. But a debt bubble lasts only as long as people are willing to spend more than they can afford. From 1982 to 1990, Japanese consumers spent like crazy. But then the group feel of the Japanese shifted inexplicably to thrift, and the Japanese markets did not recover their animal sprits for at least 16 years—and maybe not even then. What if the same thing happened in the United States? What if Americans turned into Japanese—working hard, saving their money, paying off their debts?⁸

If that were to happen, Alan Greenspan's aura would pop as fast as the bubble itself. Instead of enjoying the whole world's esteem in the final years of his career, he would be regarded as an old fool. And yet, if he could just pull off another save—as he had in 1998—his career would end on a note so high even the dogs wouldn't hear it. “This is a lot like 1998,” he must have thought to himself, with a shiver. “And what did we do? We did what we always do,” he reflected, perhaps running a little more hot water into the tub, “introduce more liquidity; it always works.”

“We know where Alan Greenspan is headed,” wrote Robert S. ...