Fedspeak

In monetary policy of the United States, the term Fedspeak (also known as Greenspeak) is what Alan Blinder called "a turgid dialect of English" used by Federal Reserve Board chairmen in making intentionally wordy, vague, and ambiguous statements.^[2][3][4] The strategy, which was used most prominently by Alan Greenspan, was used to prevent financial markets from overreacting to the chairman's remarks.^[3] The coinage is an intentional parallel to Newspeak of Nineteen Eighty-Four, a novel by George Orwell.

The deliberately confusing and carefully rehearsed cryptic language described as an "indecipherable, Delphic dialect" is meant to "give people a sense that there's no way they could understand economics and finance" and thus allow the Federal Reserve and government to manage the economy with less interference from the general public.^[5][6][7]

Although Ben Bernanke has stated that Fedspeak now means clear and extensive communication of the fed's action, the original interpretation in which Fedspeak meant "explaining more, is understanding better" is still prominently used.^[8] It should also be noted that Bernanke's speech has also been described as fedspeak.^[9]

It has been noted that the nuanced nature of fedspeak poses interpretation problems to automated trading algorithms.^[10]

Origin

The notion of fed speak originated from the fact that financial markets placed a heavy value on the statements made by Federal Reserve governors, which could in turn lead to a self-fulfilling prophecy. To prevent this, the governors developed a language, termed fedspeak, in which ambiguous and cautious statements were made to purposefully obscure and detract meaning from the statement.^[11]

Though previous "Fed" chairmen Arthur Burns and Paul Volcker were known for blowing smoke, both literally and figuratively, when appearing before Congress, Alan Greenspan is credited with making Fedspeak a "high-art".^[2]

Usage by Alan Greenspan

Although it was originally believed by some that Alan Greenspan, who is generally credited for popularizing fedspeak, may have used such language unintentionally, he revealed in his 2007 book The Age of Turbulence, that the method of avoiding the issues directly when a clear message was not desired was indeed intentional. Greenspan states that the confusion, which often resulted in conflicting interpretations, was used to prevent unintended jolts to the markets as confusing statements were typically ignored.^[7][12][13]

He noted that he came upon the dialect while at the fed: "What I've learned at the Federal Reserve is a new language which is called 'Fed-speak.' You soon learn to mumble with great incoherence."^[14]

In an interview with 60 Minutes's Lesley Stahl on September 16, 2007, Stahl stated how "In public, Greenspan was inscrutable whenever congress asked about interest rates. He resorted to an indecipherable delphic dialect known as fedspeak" to which Greenspan responded that "I would engage in some form of syntax destruction which sounded as though I were answering the question, but in fact, had not."^[15][16] When Stahl noted that Greenspan's responses were "impenetrably profound" and that this resulted in "two newspapers getting opposing headlines coming out of the same hearing", Greenspan responded that "I succeeded."^[15]

In an interview with CNBC's Maria Bartiromo on September 17, 2007, when asked to describe Fedspeak, Greenspan described it as:

It's a-- a language of purposeful obfuscation to avoid certain questions coming up, which you know you can't answer, and saying-- "I will not answer or basically no comment is, in fact, an answer." So, you end up with when, say, a Congressman asks you a question, and don't wanna say, "No comment," or "I won't answer," or something like that. So, I proceed with four or five sentences which get increasingly obscure. The Congressman thinks I answered the question and goes onto the next one.^[17]

In an interview with BusinessWeek in August 2012, when asked "about practicing the art of constructive ambiguity", Greenspan replied:

As Fed chairman, every time I expressed a view, I added or subtracted 10 basis points from the credit market. That was not helpful. But I nonetheless had to testify before Congress. On questions that were too market-sensitive to answer, “no comment” was indeed an answer. And so you construct what we used to call Fed-speak. I would hypothetically think of a little plate in front of my eyes, which was the Washington Post, the following morning’s headline, and I would catch myself in the middle of a sentence. Then, instead of just stopping, I would continue on resolving the sentence in some obscure way which made it incomprehensible. But nobody was quite sure I wasn’t saying something profound when I wasn’t. And that became the so-called Fed-speak which I became an expert on over the years. It’s a self-protection mechanism … when you’re in an environment where people are shooting questions at you, and you’ve got to be very careful about the nuances of what you’re going to say and what you don’t say.^[18]

Greenspan has been criticized for his usage of Fedspeak.^[7]

Examples

As of 2011, the Federal Reserve Bank of Dallas website still maintains a "Greenspeak" page with dozens of excerpts from Greenspan's past statements as head of the Federal Reserve Bank. Each quotation has a pointer to its full context in his speech, and is posted without commentary or interpretation.^[20]

The members of the Board of Governors and the Reserve Bank presidents foresee an implicit strengthening of activity after the current rebalancing is over, although the central tendency of their individual forecasts for real GDP still shows a substantial slowdown, on balance, for the year as a whole.

—Alan Greenspan, Testimony from the Federal Reserve Board’s semiannual monetary policy report to the Congress before the Committee on Banking, Housing, and Urban Affairs, U.S. Senate on February 13, 2001^[21][22]

Risk takers have been encouraged by a perceived increase in economic stability to reach out to more distant time horizons. But long periods of relative stability often engender unrealistic expectations of it[s] permanence and, at times, may lead to financial excess and economic stress.

—Alan Greenspan, testimony on his 35th appearance before the Financial Services Committee of the US House of Representatives on July 20, 2005^[13]

I would generally expect that today in Washington DC. the probability of changes in the weather is highly uncertain, but we are monitoring the data in such a way that we will be able to update people on changes that are important.

—Alan Greenspan, Greenspan describing the weather in response to a question by Owen Bennett-Jones on BBC's The Interview (October 2007)

Commentary

The University of Virginia Writing Program Instructor Site offers some selected quotations from Greenspan, with a suggestion that students be given writing exercise assignments of clarifying their expression of ideas.^[23]

A public relations firm cites an example of "Greenspeak" as the statement of one of the "master practitioners of creative ambiguity over the years". The brief essay mentions two other master practitioners of obfuscation, Hubert H. Humphrey and Casey Stengel. The overall tone of the essay is one of awed admiration for a sometimes-necessary skill in obscurantism. In closing, the writer notes that, "As professional performers say, to deliberately sing off-key requires a highly skilled singer."^[24]

See also

• Index of public relations-related articles
• Security through obfuscation
• Technobabble

References

Further reading

• Resche, C. (1 November 2004). "Investigating 'Greenspanese': From Hedging to 'Fuzzy Transparency'". Discourse & Society 15 (6): 723–744. doi:10.1177/0957926504046502. 

External links

• Fedspeak, Remarks by Governor Ben S. Bernanke

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