ALAN GREENSPAN'S ADDRESS TO CONGRESS, FEBRUARY 2004
Alan Greenspan is chairman of the Federal Reserve, the organization that serves the role of a central bank in the United States. The Fed, as it is known, is responsible for changing the interest rates that banks charge one another; these rates, in turn, serve as the basis for most of the interest rates that affect consumers and commercial organizations. In the latter part of the twentieth century, monetary policy as exercised by the Fed became one of the key tools for keeping inflation in check and controlling the American economy. Fiscal policy--including taxation--continues to be used in tandem with monetary policy, but the actions of the Fed are viewed as bellwethers of the economy. Twice a year, Alan Greenspan addresses Congress; those speeches are carefully watched and analyzed to determine the direction that the Fed might take. The most recent address by Greenspan was in mid-February.
Greenspan noted that inflation continues to be low, and he anticipates that job growth will begin to accelerate. Job growth will reduce unemployment, and will help invigorate the economy. Job growth has remained low despite indications that the economy is recovering from lackluster performance because productivity has been high in the workplace. When productivity increases, employers are able to use fewer workers to accomplish the same tasks that formerly required more employees. This means that employers do not have to add workers and this keeps job growth low. Productivity increased at a rate of more than five percent in 2003, and Greenspan indicated that it is unlikely that such high gains will continue. When productivity begins to slow, employers will have to hire new employees and this, in turn, will spur the economy (Ip, 2004).
Greenspan indicated that "patience" was the order of the day for the Fed, and that there is no need to rush to increase interest
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