Monetary Policy under Uncertainty

http://www.federalreserve.gov/boarddocs/speeches/2003/20030829/default.htm

Is one of my very favourite Greenspan speeches. Especially the first paragraph bears repeating.

Uncertainty is not just an important feature of the monetary policy landscape; it is the defining characteristic of that landscape. As a consequence, the conduct of monetary policy in the United States at its core involves crucial elements of risk management, a process that requires an understanding of the many sources of risk and uncertainty that policymakers face and the quantifying of those risks when possible. It also entails devising, in light of those risks, a strategy for policy directed at maximizing the probabilities of achieving over time our goal of price stability and the maximum sustainable economic growth that we associate with it.

Uncertainty, in physics, philosophy, and economics, and its related cousin, indeterminism, has been the subject that fascinates me to no end for the last years - long before my participation in SL, and likely to be long after SL, as well. It is fascinating to watch it play out here, though.

What is the point of this message... well not a very strong one. I like this speech and thought I would share it here, and some would find it useful or maybe even interesting. It's vitally important to manage uncertainty. We are like a boat in an open ocean. We cannot change or accurately predict the currents, but we have power over how we react to them, and some concept of the probabilities of what may lie ahead. Though you may always be thrown the occasional freak wave.

The difference between a good helmsman, and a bad one, is one who can navigate the waves, and one who wrecks the ship unaware of where they are steering. (to use a metaphor dating from Bronze Age Egypt)

Take care

Thanks for the excerpt, I personaly both deeply admired and often times disagreed with the Greespan philosophy and the resulting policies. I am no economist but I have lived under and ran a moderate sized interactive design business under his economic policies.

By enlarge, in my life on this planet in America, he did a hell of a job. Reagan, Bush, Clinton and Bush again, two booms of amazing size, two dishonorable busts and every manner of transformational change in between from the collapse of communism, the rise of globalization, the boom of India and China, an attack on American soil, a war, have I missed something? Most likely.

And yet, hardly a wobble in the valuation currencies, almost no measurable inflation or deflation and a gradual increase in the world GDP. There is still a long ways to go, a lot of people in this world go without, environment, natural resources and social societies need to find their way into economic calculations but on whole not a bad job indeed.

Thanks Mr Greenspan, for keeping it all together when all it wants to do is fly apart.

Linden Labs has been a bad Helmsman. How many SLers have lost thousands
as the Linden Dollar's Purchasing power has declined? Thanks to LL's poor
economic policy.

It must says something when there Econ Guru is on the job for only a few
months and the L$ dollar continues a decline from L$250 in Oct 2005 to L$330 in June 2006.

Although, in credit to LL, Philip is a heluvalot nicer looking that Greenspan