August 25, 2003

The move away from quantity targeting of the 1970's proved to be destabilizing as opposed to the price rule that automatically accommodated for shifts in the demand for money. While we attribute the thermostat invention to Paul Volker, it is clear in our minds that Alan Greenspan perfected it and he deserves all the credit in the world for the price stability of the last 15 years.Our concern is that the Maestro never fully disclosed how he did it. We have no way of ascertaining when he is behaving correctly or not, other than judging the results produced by his actions. That is why we have been critical of him since 1999; we believe that the Fed behavior changed around that time.

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