Irrational Exuberance — Alan Greenspan and the Torah of Ratzo V'shov

In December 1996, Alan Greenspan stood up at a Washington dinner and asked a question that would rattle every major market on earth within the hour.

“How do we know,” he asked, “when irrational exuberance has unduly escalated asset values?”

Two words. Irrational exuberance. Tokyo dropped 3% while he was still speaking. Frankfurt opened down 4%. Hong Kong closed down 3%. By the time New York opened, the world had heard him.

The phrase outlived everything else he ever said. It became the shorthand for an entire kind of human folly — the moment when prices stop being about value and start being about pure upward motion. Pure want. Pure ascent.

Alan Greenspan passed away yesterday at 100. He was a Jewish kid from Washington Heights — son of Herbert Greenspan (a Romanian Jew) and Rose Goldsmith (a Hungarian Jew). Bar mitzvah’d. He played clarinet and tenor sax in a swing band before he ever thought about economics, alongside high school classmates like Stan Getz. A Jewish boy from upper Manhattan who ended up running the most powerful financial system on earth for eighteen and a half years.

That two-word phrase turned out to describe far more than markets. It describes the Jewish soul.

The Chayos Were “Running and Returning”

The prophet Yechezkel saw a vision. Angelic beings — the chayos hakodesh — were moving in a strange way: ratzo v’shov, “running and returning.” They surged upward, then came back. Surged upward, then came back. Never one without the other.

The Alter Rebbe, in Tanya (especially chapter 50, and throughout Likkutei Torah), turns this into the central metaphor for Jewish service.

The soul, he says, naturally wants to run. By its origin, it yearns to leave the body and merge back into its Source. It wants to ascend. It wants pure exuberance, pure upward motion, pure ratzo.

But a soul that only runs burns itself out. The Alter Rebbe calls this klos hanefesh — the soul’s expiration. A pure ascent with no return is, in the end, death.

So Hashem built into the chayos — and into us — a second motion: shov. Return. Come back. Bring the fire down into the body. Put on tefillin. Give the coin to the poor person. Make kiddush on actual wine in an actual cup with actual neighbors at an actual table.

Ratzo without shov is irrational exuberance.
Shov without ratzo is a mitzvah done out of habit, with no heart.
The avodah of a Jew is the back-and-forth. Both. Always both.

The Maestro

This is what Greenspan spent eighteen years trying to manage at the scale of a national economy.

Two months into his tenure, the market had its largest one-day drop in history — Black Monday, October 19, 1987. The Dow fell 22% in a single session. Ratzo had collapsed into klos. The next morning, Greenspan announced the Fed would serve as “a source of liquidity to support the economic and financial systems.” Translation: shov. Return. Bring it back down to the ground, gently, before it expires.

In the late 1990s, the opposite problem. Dot-com mania. Tech stocks running upward at a pace no business model could justify. That was when he named the disease. Irrational exuberance. He named it — but he didn’t fully restrain it, and the bubble kept inflating for four more years before it popped.

After the dot-com crash and 9/11, he cut rates to 1% — levels previously unheard of. Let the economy run hot. Let the ratzo flow. The internet had taught him, as one observer put it, that sometimes you let the productivity boom happen. But that low-rate ratzo, unbound to any shov, became the housing bubble. And in 2008 the soul expired again — this time spectacularly.

He testified before Congress in a “state of shocked disbelief.” His own famous words came back at him. He had named irrational exuberance and still hadn’t found a way to fix it.

That’s because no interest rate could ever fix it. Only Torah can.

You Can’t Kill the Exuberance

This is the move most of the world misses. Reading Greenspan’s 2008 testimony — reading the way the media talks about any market mania, then or now — the implied solution is always suppression. Stop the exuberance. Choke off the rise. Don’t let people get excited.

The Torah view is exactly the opposite.

The Alter Rebbe does not say kill the ratzo. He doesn’t say the soul shouldn’t yearn upward. The soul must yearn upward — that’s its life. A Jew who never runs upward, who never burns with longing for something higher, is a body without a candle.

The answer was never suppression. It’s binding. Ratzo, then shov. Shabbos, then Sunday. Davening, then breakfast. The fire of yearning, then the act in the world.

Every mitzvah is this rhythm in miniature. You yearn for closeness to Hashem (ratzo) — and you do something physical that brings the yearning into the world (shov). Tefillin is shov. Kashrus is shov. Tzedakah is shov. The fire is necessary; the body is necessary; the oscillation is the whole point.

Markets that only run upward crash. Souls that only run upward expire. The cure for both is the same: come back. Return. Make the rise land in something.

A Jazz Band and a Fed Chair

There’s a small detail in the obituaries worth pausing on. As a teenager, Greenspan put off college for a year to play in a jazz swing band. He told CNN later: “I was the band intellectual who did their income taxes.”

After a year, he said, he realized he belonged in the library, not in a nightclub. So he enrolled at NYU.

That, in a sentence, is the life of a Jew. Ratzo — the music, the dream, the upward pull. Shov — the library, the work, the desk. He didn’t abandon the jazz. His wife says he loved it until the end. He just learned to bind it to something. He took the exuberance and gave it a body.

His career managed, badly and brilliantly, the same problem at the scale of nations.

He Named It

What he gave the world — whether he knew what he was naming — was a name.

Before “irrational exuberance,” the moment didn’t have a word. There was just the rise, the bubble, the cycle, the crash. Greenspan looked at the room and said: that thing you’re doing is a thing. And once it was named, you could see it everywhere.

For us, sitting in 2026 — with AI valuations at levels that make 1999 look quaint, with crypto cycling through its fourth bubble, with the new Fed chair Kevin Warsh openly arguing that policymakers should “take the same leap of faith with AI as they did with the internet under Greenspan” — the word matters more than ever.

But for a Jew, the word does more than describe the market. It describes the soul that has forgotten to come back. It describes the davening with no follow-through. It describes the inspiration on Shabbos that didn’t make it to Monday morning. It describes the ratzo that never found its shov.

The maestro passed away at 100 — the age of which the mishna says it belongs to a different world. He was a Jewish boy from Washington Heights who named, in two words, the oldest spiritual problem there is.

The Torah’s answer is older than the Fed. Ratzo v’shov. Run, and return. Burn upward, and come back. Put the fire in a body — a body of mitzvos, of tefillin, of a Shabbos table, of a coin in someone’s hand.

That’s how a soul lasts a hundred years.
That’s how a market does, too.

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Sources: Yechezkel ch. 1 (the chayos “running and returning”) · Tanya ch. 50 & Likkutei Torah on ratzo v’shov & klos hanefesh · Greenspan’s “irrational exuberance” speech (AEI dinner, 5 Dec 1996) · Black Monday liquidity statement (Oct 1987) · 2008 House Oversight testimony · obituary details (Mitchell statement, CNN, jazz-band detail).