Jerome Tuccille

Sunni: I guess I've somewhat unwittingly fallen in with the pessimists, then. It seems to me that the falling dollar, the large trade deficit, and an increasingly rapacious federal government make some kind of unpleasant correction inevitable, and soon.

Jerry: No question that a policy that fosters a weak dollar combined with the trade deficit poses problems down the road. The question right now is, how well are people doing? The average person is doing relatively well in terms of standard of living. Those who want to travel to Italy, however, have a problem with the expensive euro relative to the dollar. But what's going on is not all that new. We've been running trade and budget deficits for decades, except for a brief spell during the Clinton years. So far our economy has been able to absorb it. You need to hedge yourself against disaster at all times, which means you need to be holding gold, foreign stocks and bonds, and other securities besides U.S. stocks and bonds. Unless there is a global collapse, a diversified strategy should see you through most eventualities.

Sunni: I know that the federal government cooks its data to some degree; they have to keep up the pretense of being in control of markets. Discontinuing M3 is a good example of trying to hide important information from foreign investors as well as the American public. However, does it necessarily follow from that that shadow government statistics are necessary?

Jerry: Discontinuing M3 was largely a result of not being able to measure money supply that accurately anymore. Government data are always suspect. The government lies mostly about its budget deficits. It has always engaged in a game of smoke and mirrors where the public purse is concerned. Obviously, the more information and data that the public has, the better off it is. But most of the information is already out there. Certainly, Wall Street and the financial institutions are privy to their own data, which is more accurate than the government's. I'm always amused that libertarians think the private sector can do anything better than the government can, and rightly so, but they make an exception when it comes to compiling data. Sophisticated investors view government figures with skepticism, if not outright scorn. The market is always discounting the data because the information is already out there in the marketplace. The stock market doesn't lie. Prices reflect the reality under the surface. If you want to know what's going on in the economy, how healthy or unhealthy it is, just look at the stock and bond markets.

Sunni: One thing I'm finding particularly interesting is that many who probably cheered when Alan Greenspan was appointed Fed chairman have been jeering his work of late. You wrote an interesting biography of him some years back—I reviewed it for Townhall.com but all my reviews there seem to have vanished. Is our current economic situation the mess that Greenspan made? Or is that too harsh a judgment?

Jerry: The economy's not a mess at all. It's growing at 3% to 4% a year, and we're fully employed with 4.5% unemployment. I remember when 6% unemployment was considered full employment. You can argue about the quality of jobs, but anyone who wants to work can find employment. During Greenspan's tenure as Fed chairman, the economy grew at better than 3.5% annually and inflation was held under 3%. His record is outstanding. I know that gold bugs would detest the man even if he managed to walk on water, but they live in a utopian universe. The fact is, we don't have a gold standard, we do have a central bank, and Greenspan did a superb job of fine-tuning monetary policy even though he never renounced his preference for a gold standard. Ask yourself if you would rather have the Federal Reserve run by a man with Greenspan's philosophy or by someone like Robert Reich or J. Kenneth Galbraith in his heyday. Given the environment we live in, I don't know anyone who could have done a better job of balancing economic growth against the threat of inflation. Of course the revisionists are out in droves now, inevitably so, in an effort to humanize the image of a man who seemed holier than God when he was in power. The pendulum always swings too far. But on balance, Greenspan's record speaks for itself.