Greenspan's Testimony Jude Wanniski July 19, 1996

Memo To: John R. Wilke, WSJournal and Richard Stevenson, NYTimes
From: Jude Wanniski
Re: Greenspan testimony

I note the Journal account of Greenspan's Humphrey Hawkins testimony before Senate Banking on Thursday emphasized a potential inflation problem: "Fed Sees Anti-Inflation Progress Easing," while the Times emphasized a potential deflation just ahead: "Greenspan Sees Robust Growth Slowing Down." Because Greenspan did lay out the case for both the inflation hawks at the Fed and the inflation doves, it is of course possible to stress one or the other in your stories. The fact that both stocks and bonds enjoyed major rallies as Greenspan delivered his report strongly suggests that the market agrees with the Times emphasis — as I did in watching him on CNBC. The most important element of Greenspan's testimony was in his discussion of real wages. He clearly told the markets that although the employment pool is tightening and that there are upward pressures on wages, he will not worry about this as long as he sees accompanying productivity increases. (A point both of you covered in your accounts, I was happy to see.) I had hoped that Greenspan would mention the stability of the gold price as a good sign on this account, though he did at least note the flatness of commodity prices in general. If you have a chance to review his testimony with him in the weeks ahead, it would be worthwhile to the market in general and your readers in particular if you would explore this area with him. The rest of the financial press corps can report within a simple Phillips Curve model — which Greenspan's testimony emphatically undermined — but it is critical that the Journal and the Times understand and develop the subtlety of Greenspan's thinking on this matter. The whole world in one way or another depends upon the integrity of the dollar — which means 6 billion people can benefit by your superior reporting.