Guru to five presidents

Seated next to her at dinner, I was prepared for a dull evening with a politician. ‘Tell me, Chairman Greenspan,’ she asked, ‘why is it that we in Britain cannot calculate M3?’. I awoke. M3 is an arcane measure of money supply embraced by followers of Milton Friedman. We spent the evening discussing market economics and the problems confronting the British economy.

Thus , according to Alan Greenspan’s semi-autobiographical The Age of Turbulence, began the first meeting between Alan Greenspan and Margaret Thatcher, at a September 1975 British embassy function in Washington. Greenspan evidently developed a great liking and respect for Thatcher, because, apart from anything else, she wished to conceptualise major issues of public policy. She wanted to locate day-to-day decisions against the background of a larger framework of ideas and principles, and within a long-run historical context.

Nowadays wry amusement may greet the notion that a reference to M3, like a double espresso, can wake someone up. M3 has certainly had a more chequered reputation in the following three decades than either Greenspan or Thatcher, and one has to wonder whether Greenspan’s account of their 1975 encounter is meant as a joke. (There is much other humour in the book.) Nevertheless, no one can deny the obvious seriousness and concern for the public good of both these great figures.

Compare Greenspan’s views on Thatcher with his comments on Nick Brady, US Treasury Secretary in the 1989–93 presidency of the first George Bush. Bush and Brady were worried that the feebleness of the recovery from the 1991 recession would hurt Bush’s re-election prospects, and they had no qualms in bullying Greenspan to lower interest rates. Greenspan, who says he had ‘a terrible relationship’ with Bush, is scathing about both of them.