Greenspan Explains Greenspeak Conundrum

Alan GreenspanFormer FOMC Chairman Alan Greenspan was at Book Expo America 2007 last Friday, promoting the September publication of his memoirs, titled The Age of Turbulence: Adventures in a New World. [Photo: REUTERS/Eric Thayer/Penguin Press/Handout]
As the keynote speaker, he dished some dirt on past presidents and also provided insight into why Greenspeak was a necessary evil throughout his tenure:

In the process of writing the book, Greenspan said that as he mulled some of the unusual economic events of recent years – low interest rates, unusual developments in the bond market – he found a key explanation has been overlooked.
“A seminal event turns out to be the end of the Cold War,” Greenspan said. Most have interpreted that event only in political and military terms, but “very little time has been spent on understanding how important an economic event that was.”
For Greenspan, one of the major lessons he’s learned is the importance of flexibility in an economy, a realization that took hold after watching the economy snap back from the terrorist attacks of Sept. 11. “The main important issue is because we can’t forecast crises and events…we must be prepared and capable of absorbing shocks,” Greenspan said. “That’s become a very critical part of overall economic policy,” he said.
Greenspan explained that his tortured way of talking was in fact deliberate and constructed because he needed to find a way to deal with questions from members of Congress that simply couldn’t be answered.
“I got people asking questions I couldn’t and shouldn’t answer” because of their possible market impact, said Greenspan. He said his convoluted phrasing was aimed at making it appear that “I said something extraordinarily profound,” and when the media would draw conflicting interpretations of the comment, it meant “I succeeded.”
The former policy maker lamented that he was frequently a “prop” for legislators in his appearances before Congress. He added that he could often tell that the questions he was being asked were written by staffers and that the congressman had little idea of the substance of the query.
He also noted that one of the main dangers of answering questions was the market’s propensity to project a hedged answer as the same thing as a certain prediction, which would cause markets to mis-price themselves. — Dow Jones

Prospective FOMC officials and politicians can study Greenspeak at the Federal Reserve Bank of Dallas website.