Alan Greenspan is well loved among the governing elites and seldom criticized, because he convincingly plays the role of America’s Dr. Pangloss. When the occasional upset occurs, the wise Federal Reserve chairman comes forward to reassure the citizenry: Not to worry, we are still living in the best of all possible worlds. Disregard the stock-market meltdown that destroyed trillions in putative savings; market adjustments of value are entirely normal to free-market capitalism and altogether unavoidable. Never mind Bush’s budget deficits; these will be corrected through further tax reductions and privatization of federal functions like Social Security. Do not fret over the buildup of household debt, the stagnation of hourly wages, the absence of jobs for many unfortunate citizens; people should instead feel good about the economy. Productivity is improving robustly, so too corporate profits, which insures that everything will work out for the best.

Father Greenspan has been taking a victory lap these past few months, declaiming cheerfully on these and other matters, basking in the glow of his seventeen-year tenure. The President recently nominated Greenspan for another term as Fed chairman–his last, presumably–and the Senate’s reconfirmation hearing will likely resemble Queen Victoria’s Jubilee. Greenspan made himself the living embodiment of the conservative market orthodoxy that still reigns over conventional opinion, despite its spectacular failures. He preaches it, he governs by it, he explains away the many contradictions. Not surprisingly, the monied interests of Wall Street and corporate America like it like that. So do the major news media who, true believers themselves, see nothing to question in Greenspan’s monetary policy. In the face of this establishment unanimity, even once-reliable critics like organized labor have lost their voice.

But all is not quite as Greenspan would have us believe, and someday hence, when a bold young scholar sets out to write a revisionist history of the Greenspan era, she will find an abundance of good material. He triggered two recessions, both by accident if one believes his public testimony. He passively observed the runaway inflation of stock-market prices and refused to do anything to avert the eventual collapse. He engineered legality for the new megabanks like Citigroup and JPMorgan Chase, both of which became festivals of megabanking fraud. The central indictment, however, will involve the many ways Greenspan’s hard-money policy unbalanced the economy by favoring financial interests over the real economy of work and wages. For most of his tenure, in pursuit of reducing inflation further, Greenspan held back economic growth in order to maintain an artificial surplus of labor–higher unemployment that guaranteed that wages would stagnate to the benefit of profits and financial returns. It worked, of course, but far too well. Greenspan drove the price indicators down to zero and didn’t know when to stop. He pushed the economy into the danger zone of deflation–falling prices, inadequate demand, imperiled debtors–and reversed course much too late to avoid various disasters. The economy is still struggling with the consequences of his monumental error.

These twilight years may give Greenspan an opportunity to make modest amends. During most of his tenure, he responded obediently to the bond-market “vigilantes” who cheered on the Federal Reserve’s obsession with fighting the last war–inflation–and scolded him when he seemed too slow to tighten credit. Now these Wall Street wiseguys are back, once again demanding that the Fed raise short-term interest rates promptly and substantially or else face a renewal of runaway price inflation. This same notorious logic was regularly employed by the Fed during the 1980s and most of the 1990s to slow down the economy and suppress wages. After the bubble and boom and breakdown of the nineties, is the Fed ready to resume the same ruinous monetary policy that led to the great imbalances?

Maybe not. This time, Greenspan seems quite reluctant to act on the bond market’s supposed wisdom. He talks vigilance and might bump up rates slightly, but so far hasn’t yielded to the Wall Street claque’s hard-money demands. The chairman knows (though he has never said so plainly) that rising prices are welcome news, backing away from deflationary risks and giving companies more leeway to increase prices and to increase wages. In fact, the Federal Reserve has deliberately been trying to stimulate a little price inflation for those very reasons and appears to be succeeding. Reversing monetary policy at this critical point could be disastrous, crumpling the fragile growth before the healing effects have reached ordinary folks and tightening the squeeze on over-indebted families.

Father Greenspan deserves a rest. It would be nice to see the Senate in its wisdom retire him, but that’s not going to happen. At the very least, however, Congress has to get real, set aside the Panglossian bromides and begin asking tough questions about what Greenspan’s tenure has done to the country and how monetary policy might be remade to serve all Americans–not just the chairman’s admirers.