As Alan Greenspan’s fifth and final term as Federal Reserve chairman comes to a close in January next year, 2006, more and more people are asking the question: “What were the secrets of his extraordinary success and can he pass them on to his successor?” This is not a small question given the Fed ­chairman’s ­legendary reputation for obfuscation. (According to Andrea Mitchell, his wife, Mr Greenspan had to propose three times before she ­understood him.)

There are, indeed, huge stakes for the global economy as the world’s most important financial position changes hands. Many financial analysts warn that, at a minimum, there will be a prolonged period of market volatility. However, if one looks at how the science of monetary policy has evolved over the past two decades, there is cause for optimism. In particular, although many people believe that monetary stabilisation policy has been more central than ever under Mr Greenspan, his greatest success may have come from making it less so.