One article writes that Alan Greenspan put Objectivism's politics "into practice on a massive scale." Another, that he "applied his guru's philosophy to the letter." A New York Times article described him as the "infallible maestro of the financial system."
Though article-writers should know better, it is not very hard to see how others might find convincing the premise that he employed her ideas. Alan Greenspan did have a long-lasting personal relationship with Ayn Rand, and even wrote articles for her magazine. And most people have only the faintest notion of what the Federal Reserve does. But not only did he not employ Ayn Rand's laissez-faire philosophy, it would be impossible for the Chairman of the Federal Reserve to do so.
The Federal Reserve is the government agency that regulates the money supply of the United States. It was established by an act of Congress in 1913. Its Chairman - which Greenspan became in 1987, five years after Ayn Rand's death - is appointed by the President. It controls the issuance of U.S. Dollars, which of course only the U.S. government is legally entitled to print. While its board of governors is made up of presidents of certain major banks, it is a tool for manipulating markets, whose power and purpose are wholly created by the United States government.
The basic function of the Federal Reserve is to manipulate economic figures like inflation and unemployment, which it does by buying and selling bonds. When its chairman and board believe inflation needs to be put under control, for instance, it will sell bonds in order to decrease the amount of money in circulation. When they believe inflation is not a problem but unemployment is too high, it attempts to decrease unemployment by buying bonds with newly-created money, increasing the money supply, making banks more willing to lend. The full mechanism of the Federal Reserve, and what the full economic consequences of its actions are, is a highly complex issue, but this gives you a basic idea of how it functions.
Objectivism, as anyone with a general idea of what it advocates could now imagine, opposes the existence of such an agency. A laissez-faire system would use currencies issued independently by private banks and backed by hard assets. The use of currencies backed by hard assets, whether issued privately or by a government, is usually called "the gold standard," as gold is typically the asset chosen. The United States ended its last semblance of a gold standard in 1971, 16 years before Greenspan became the Fed Chairman. Ayn Rand supported the gold standard, and her magazine advocated it... in fact, Greenspan wrote the article on it.
In "Gold and Economic Freedom," Greenspan wrote...
Under the gold standard, a free banking system stands as the protector of an economy’s stability and balanced growth.
In the absence of the gold standard, there is no way to protect savings from confiscation through inflation. There is no safe store of value. If there were, the government would have to make its holding illegal, as was done in the case of gold. [...] The financial policy of the welfare state requires that there be no way for the owners of wealth to protect themselves.
This is the shabby secret of the welfare statists’ tirades against gold. Deficit spending is simply a scheme for the “hidden” confiscation of wealth. Gold stands in the way of this insidious process. It stands as a protector of property rights. If one grasps this, one has no difficulty in understanding the statists’ antagonism toward the gold standard.Ayn Rand had this to say about the Federal Reserve's continuous expansion of the money supply:
Inflation is not caused by the actions of private citizens, but by the government: by an artificial expansion of the money supply required to support deficit spending. No private embezzlers or bank robbers in history have ever plundered people’s savings on a scale comparable to the plunder perpetrated by the fiscal policies of statist governments.And this:
In the absence of the gold standard, there is no way to protect savings from confiscation through inflation. There is no safe store of value. If there were, the government would have to make its holding illegal, as was done in the case of gold.There are no reason these and Objectivism's other arguments against centralized manipulation of currency don't apply as critiques of Greenspan's central planning as Federal Reserve Chairman. That's why Yaron Brook, president of the Ayn Rand Institute, cited Greenspan's actions as one of the causes of the 2008 financial crisis. In a Forbes article written in the midst of the crisis, he argued "In a free market, lending large amounts of money to low-income, low-credit borrowers with no down payment would quickly prove disastrous. But the Federal Reserve Board's inflationary policy of artificially low interest rates made investing in subprime loans extraordinarily profitable."
How can the man who manipulated the market with the very mechanisms Ayn Rand - and he, when he wrote for her - so decidedly opposed have been employing her philosophy? He couldn't have, and he wasn't. Markets don't have maestros.