Without Greenspan

Experts can make only short term forecasts, but they do not dare to make long term ones. It will on depend on the policy of the Greenspan's successor - Ben Bernanke, former chairman of the Bush's Council of Economic Advisers.

Alan Greenspan has become a real cult figure during all these years. Despite being a head of a national body he is actually a cult figure for the whole world.

Lately he was described as "holding control over the world economy management." Making seemingly ordinary decisions on the USD rates, Greenspan was giving indubitable economic reasons each time. He became a real global economist, possessing full knowledge about the world economic processes and about what to do if something goes wrong. Greenspan is always trusted simply because he is never mistaken.

The more difficult is the moment of his departure. The world economy is losing its most trustworthy barometer. Greenspan is actually not retiring, he is going to continue working, but now in private business. He still has his intuition and he will be predicting events, although he will not have due levers anymore, like in the past when he could cut a Gordian knot by one decision.

The Fed can pay attention to what its former chief says, but at the same time it will pursue its own policy. Alan Greenspan not long before his departure had warned the US society that the real estate market was on the verge of a probable crisis displaying obvious features of a classic "bubble."

At the same time, the former Fed head was far from dramatising the situation. In his view, such crisis is even necessary for the US economy, because lately the Americans save much less than they spend. A "behavioural change" of the nation will allow to reduce scarcity of the current payment balance and it will boost the US dollar.

When on January 31 - on the Greenspan's last working day in the Fed - a decision on a new 0.25 per cent funds rate raise was made, it reached 4.5, so experts started to prognosticate a skyrocketed dollar in the near future. According to some of them, the euro can fall lower than 1.20 USD against 1 euro.

Nobody can predict now what is going to happen next. It will all depend on Ben Bernanke now. If Alan Greenspan was always independent in his judgements, his successor will keep looking back to the White House.

Correspondingly his position will be tied to the official US course. If we consider that the White House is lately concerned about the growing inflation, further raises of fed funds-rate entailing corresponding raises of the interest rates become obvious.

However, Mr. Bernanke has already warned public that the fed funds-rate will not be raised. It means that certain trends in the USD rate that could be formed if the fed funds-rate were growing smoothly and constantly.

Besides, now investors of the whole world are losing a fine tuned "navigation" system in the person of Fed Chairman Greenspan. During the long years of his activities the Fed head learned how to send fine signals to the outer world, while the investors learned how to understand each of his words and even ponderous pauses.

The Greenspan policy was predictable and he has never been ashamed of that. He was too wise for misleading people. According to Greenspan, the human nature is programmed for mistakes. For instance, business circles very often perceive a temporary favourable situation as a natural order of things, underestimating a possibility abrupt changes. And they pay dear for their unrealistic expectations.

Ben Bernanke, of course, gets a carte-blanche and he will yet form his behavioural model at this position. But he is unlikely to court investors for a simple reason that it is virtually impossible to play at both fronts - with the White House and with the market. And therefore the Fed's influence on the market can be reduced significantly.

It is a negative moment not only for the US economy, but for the world order in general. The USD its somewhat shaky positions in the last three years, remains and will remain a serious instrument influencing the global market. And a lot, although fortunately not everything, will depend on the Fed's funds-rate tactics.

The European Union can to some extent influence the relationship between the USD and euro. The rate raise is only beginning in Europe - presently the European refinancing rate is 2.25 per cent.

Experts forecast a raise of the euro rate in 2006. As a result the world can witness parity between the euro and the USD in a few years. There are contradicting opinions about this however.

Anyway, a complicated currency epoch is coming. The further USD rate dynamics are becoming unpredictable, so far the logics of Ben Bernanke is unclear. The USD can lose significantly in its value, or it can conquer an unbelievable height.

The problem is that Mr. Bernanke might have no logics at all: when one has to solve the current budget problems, it is hard to care about it…