At 76 years of age, has Alan Greenspan peaked? With the appearance of a number of biographies (the latest written by Bob Woodward, of ‘All the President’s Men’ fame) some are speculating that finally, this most careful of market watchers has finally run out of steam, along with the decade-long boom, with which he will be associated in history.
They might, more precisely, argue that his power to intervene and prolong the boom has waned - and on this, the jury stays out, following his action early in January to sharply cut US interest rates, taking the markets by surprise. However, the fact that there was such an element of surprise in the markets goes to show that, in terms of his ability to interpret the markets, compared with his peers, the powers of the most accomplished central banker the twentieth century produced remain undimmed.
One of Greenspan’s traits as a policy maker was an ability to anticipate and move in good time, to lock the stable door before the horse showed any signs of bolting. When we look to Ireland to ask where these lessons can be applied we cannot look to the financial markets (that’s Greenspan’s game) but we should look in the direction of tax policy the sole (but by no means unimportant) remaining lever of economic policy remaining at the disposal of an Irish Government. Then, when we look at the proposal contained in the December Budget statement to lift the limit on employer PRSI payments we see how apt and inappropriate such a move would be because it will come at just the worst moment possible (an even worse moment than could have been anticipated when the move was first mooted) for the economy in many years.
Since the move was first mooted the disadvantage has become even greater. The dollar has fallen back against the Irish pound by about 15 per cent since the Budget, which means that, to US investors, the cost of Irish salaries over and above ?36,000 will stand, in 2001, a whopping 25 per cent plus over and above where they stood in 2000. This sledge-hammer blow to Irish competitiveness, and particularly the drive to create greater added value employment, if it were to be persisted with in the Finance Bill, would be most unfortunate. |
