Last year, near Edinburgh, the Scottish capital, archeologists discovered a field blessed with unusually rich soil. When they set the biochemists on it, they found that it was saturated in ancient blood. The site was in the grounds of an old monastery hospital.
Even before the American Medical Association rose to power, the old English word for a doctor was a ‘leech’. So for generations, the tenderly caring monastery physicians had bled their ailing patients on a daily basis and then taken the pint or so of the good stuff to be poured into the richer than average loam of the monks’ garden.Doubtless yet to be discovered is another field nearby in which the more solid remains of the subjects of these heroic medical measures found their premature graves. The monkish doctors, pro-bono to boot, never noticed a connection between their constant bleeding and the high mortality rate of their patients. For hundreds of years they assumed that the death rate was in spite of, rather than because of, their dubious practices. Equally, their patients went to these selfless mediaeval monastery medicos without noticing that they were treading so readily in the footsteps of the anaemic dead.
Nowadays, of course, ‘bloodsuckers’ is an epithet aimed at the billing practices rather than medical techniques of doctors, but their professional aura of omniscience lives on.
The modern medical profession has exactly the same aura of respect, with a few dissenting voices like that of Baron von Leibniz, who roundly declared that a great doctor kills more people than a great general.
Most of us listen obediently to the profession which has in various fads whipped out wombs, tonsils and adenoids, cut off breasts, lobotomized brains and, outstandingly, in the case of Queen Victoria’s own quack, recommended excising several yards of colon to cure constipation. Our general response is to go back for more – if we were not terminally cured the first time. In short, a professional never makes mistakes.
Physicians for the economy get the same awesome and unearned respect. ‘Doctor’ Greenspan has responded much like the ancient leeches, draining the lifeblood of the economy by hiking interest rates whenever the patient appeared to be on the point of recovering. And the long-suffering Wall Street and Washington DC kept calling for more.
The trouble is that doctoring the books comes so easily. After prolonged consultations, the wise men on The Advisory Committee to Study the Consumer Price Index have now suggested that US inflation has been much lower than everyone thought, because if people couldn’t afford a car they would cycle, and if cake was too expensive they would eat bread.
It is, of course, also true that these particular sages had all reached these conclusions before they were even appointed, let alone embarked on their entirely objective study. It is also true that this represents a godsend to the government that commissioned them, since the implication of this fortunate discovery is a mediaeval regime of bleeding and fasting – higher taxes and lower outlays on social security and pensions. However, like all good doctors, their word is law.
Of course, we cannot expect an apology from the Fed for hiking interest rates in response to the old assumed inflation rate. In a similar fashion, after a year of monthly hiccoughs on the Street as employment went up and the homeless went off the streets, it has suddenly been discovered that the ordained ne plus ultra unemployment limits were passed – without triggering inflation. Of course, it helps that this epoch-making discovery was made the year that President Clinton, who had just reappointed him at the Fed, was himself running for re-election and needed uninterrupted growth.
One would by now have expected Wall Street to be filled with little boys running up and down and shouting that Emperor Greenspan had no clothes, since every prediction and every nostrum that he and the Fed hold dear have proved ineffective.
But no, like all those departed patient Scottish patients of the monks, they keep coming back for more. The monks would have said something like: ‘The bleeding was really helping but a sudden quaternary ague undid all its good work.’ Now it’s: ‘Well of course, we should be having high inflation by now, but it seems that the Non Accelerating Inflation Rate may need more scrupulous adjustment in the light of ongoing blah blah…’
Far from Greenspan’s professionalism being doubted, all he has to do, in prose as impenetrable as a doctor’s prescription is illegible, is to suggest that the bull market may be reaching its peak, and off they all run again. As he put it in December, in his usual petomanic manner, ‘How do we know when irrational exuberance has unduly escalated asset values, which then become subject to unexpected and prolonged contraction.’
The possibility is definitely there – but I would need a second opinion before taking Dr Greenspan’s word for it.
If, however, it is true, and a bear market bares its fangs at us, then there is a big question for investor relations professionals. In its present form, IR has grown along with a steadily pawing bull market. A bear market would, or will, present the real test of the discipline’s professionalism – the assumption of indispensability.
Will the chief executives and boards of directors of corporate America call upon us – whose calling is investor relations – with the same faith in our omniscience as they afford doctors and central bankers?
