Misreading the Fed

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IF ANALYSTS AND INVESTORS would listen to Federal Reserve Board chairman Alan Greenspan with a degree of precision equal to that which he employs when he speaks, the world of financial markets would be a calmer place. Those who reacted in mild panic to last week’s testimony just weren’t listening closely.

Suppose, just suppose, that everyone was paying attention when the Fed chairman told congress, “Some of the strains that accompanied the difficult business environment of the past several years apparently still linger. . . . Many managers continue to exhibit an unusual reluctance to . . . [add] to their capital stock. . . . Business fixed and inventory investment . . . have risen only moderately.”

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