February 01, 2006

Fed Chair Greenspan steps aside - and his successor has big shoes to fill

He's been gone a day. Anyone miss him yet?

Parts of Greenspan's legacy may make Bernanke's job harder. Above all, Bernanke will have to contend with a huge trade deficit that can in part be blamed on the Fed's own policies under Greenspan.

By holding interest rates down for so long after the stock market bubble burst in the late 1990s, Greenspan pumped up a housing bubble that allowed consumers to borrow against capital gains on their homes, spending more than they earned.

Indeed, strong consumer spending has kept the U.S. economy rolling along when other nations continue to languish, but at the cost of a negative personal saving rate, a growing load of household debt and a mounting deficit.

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