"Thank God we're only talking about impeaching the president. Imagine what a crisis we'd have if we were trying to get rid of Alan Greenspan." The words of one congressman, uttered at one of the innumerable moments of crisis during Bill Clinton's traumatic year, were said without a hint of irony. Though the chairman of the Federal Reserve may never compete for headlines with the world's most famous intern, history is unlikely to be in much doubt whose contribution to world events was the greater in 1998.

After all, though this was the year Mr Clinton was caught in the sights of a legal and political assassination attempt, it was also the year US financial markets and the US economy dodged a bullet of their own - or, rather the incoming missile of the global slowdown. And in the view of many of those who experienced it, the main reason for the great escape was the timely intervention of Mr Greenspan and his colleagues at the Fed. In the space of a few critical weeks this autumn, the Fed chairman simultaneously executed a swift easing of monetary policy and engineered the rescue of a failing hedge fund which, had it fallen, might have wreaked havoc on the entire US financial system.

Both actions were criticised widely at the time but three months later it is clear they helped restore calm to jittery markets. Now the economy looks set for more solid growth, a measure of confidence has returned to financial markets and the stock market is back close to record territory. And what is good news for America is good news for the world. Strong US growth has been the lifeline for the rest of the world in the last year - and if that growth continues the chances of a global recovery are good. In fact some economists argue that the real significance of Mr Greenspan's annus mirabilis is a fundamental change in approach by the Fed.

"The Greenspan Federal Reserve appears to have shifted regime, operating with a new policy framework that takes the world economy and financial system into account, viewing the US as one component in this system," says Allen Sinai, chief economist at Primark Decision Economics in New York. No one is yet prepared to say the crisis is over. Nor can it be claimed that the Fed alone calmed international markets (fiscal and financial changes in Japan, European rate cuts and an International Monetary Fund programme in Brazil all helped).

What few seriously doubt is that Mr Greenspan's role was pivotal. The question, though, is whether his actions will turn out to have been entirely beneficial. Many in financial markets are happy to raise a glass to the Fed chairman this holiday season. Others, however, argue that 1998 will be remembered as the year when the seeds of economic destruction were sown. They say Mr Greenspan has allowed a stock market bubble to inflate; and far from rescuing the world from collapse in 1998, he has actually significantly raised the possibility that when the end of this long US expansion eventually comes, the fall will be greater than ever. They argue that 1998 will be remembered not as the year of the Great Greenspan World Economic Rescue, but as the year of the Great Greenspan Bubble.

What neither admirers nor critics dispute is that the 72-year-old Mr Greenspan is now in possession of something rare in central banking circles - cult status. It is not just that he is in charge of the most powerful central bank in the world. In his 11 years at the Fed, he has earned a reputation for economic management that has made his name synonymous with America's economic renaissance. Steering monetary policy through a succession of crises in the late 1980s and early 1990s - the stock market collapse of 1987, the savings and loans debacle, the Mexican debt crisis - he has been widely credited, quite seriously, as having been the architect of that renaissance.

He is known not only for his fearsome backhand on the tennis court but also for a clever political mind, which has enabled him to get appointed or re-appointed by three presidents and to count among his close friends senior members of both Democratic and Republican administrations. Few bureaucrats (and fewer central bankers) have ever achieved such status. His followers are no longer confined to the bond trading rooms of investment banks; though his face is still unfamiliar to most, his name is literally a household one.

His standing is all the more remarkable since his public pronouncements, though frequent, are as Delphic as ever. "We never know what Mr Greenspan is going to say before he says it," Mike McCurry, the former White House press secretary once remarked, deflecting criticism that the White House was interfering in the Fed's policy. "In fact, we don't generally know what Mr Greenspan has said even after he's said it."

So how did Mr Greenspan achieve his miracle-working reputation? And, in particular, how did he manage this year (after so long in the post) to go from workmanlike monetary bureaucrat to master of the universe?

The year 1998 could easily have seen the Fed chairman's steadily rising reputation depreciate faster than a Russian share price. The US economy was caught in the cross-currents of opposing trends. The domestic economy had developed a head of steam that looked alarmingly inflationary. Output had expanded by 3.9 per cent in 1997, a rate well in excess of that normally considered sustainable without igniting price pressures. Unemployment was below 5 per cent and most Fed officials cautioned that it was only a matter of time before wage pressures began to accelerate.

Worse still the stock market, which Mr Greenspan had been fretting about publicly for more than a year, continued to inflate at an alarming pace. Since the notable failure of the chairman's earlier attempt to cool the market down - his "irrational exuberance" speech in December 1996 - Wall Street had risen by more than 25 per cent.

But this buoyant outlook was clouded by what was happening in Asia. US manufacturers were just starting to report export problems from collapsing overseas markets; and the betting was that the trade problems would slow growth considerably. Moreover, Mr Greenspan was concerned about financial markets. He had long been warning that the rapid pace at which money moved around the world in modern markets posed new threats to the US economy. If investors got nervous elsewhere he knew US markets could suddenly be overwhelmed with panic - freezing up the flow of money and bringing the still benign US expansion to a juddering halt. In the circumstances the Fed played safe. With signs that the hectic pace of growth was continuing, the central bank's open market committee refrained from raising rates at its March meeting, but moved to a "bias towards tightening" policy, meaning it saw the inflationary risks as greater than recessionary ones. Throughout the spring and summer the Fed remained in this stance, ready to pull the interest rate trigger if necessary.

Then Russia imploded. The debt moratorium and rouble devaluation significantly altered the equation. For months Mr Greenspan had been quietly complaining that US investors had taken an unrealistic attitude to risk - they no longer seemed to believe it existed - and spreads between yields on the riskiest of investments and those on riskless assets had declined sharply. But with Russia gone, investors took fright. Risk spreads gaped ominously and undermined domestic financial markets. Share prices plummeted. The Fed chairman understood that he had to act quickly to convince markets the US central bank was ready to assist the world economy in crisis. In discussions with other central bank governors and finance ministers around the world, Mr Greenspan agreed to sign up to a special statement by the Groups of Seven industrialised countries that said the balance of risks in the world economy had shifted from inflation to recession.

But markets were still unclear whether that meant the Fed would cut rates.

On September 18, Mr Greenspan learned of the first major US casualty of the crisis. Long-Term Capital Management, a hedge fund, had run into difficulties and seemed about to collapse. The Fed decided to orchestrate a rescue, paid for by the private sector, to stop the risk of contagion. A week later, the FOMC cut short-term interest rates by a quarter point. The initial market reaction was negative - too little, too late, some called it and stocks continued to fall. Two weeks later, in a rare decision taken between meetings of the open market committee, Mr Greenspan himself decided another quarter-point cut was needed. To his supporters Mr Greenspan's actions - signalling a rate cut was coming, authorising the rescue for LTCM and executing a quick double interest rate cut in two weeks - were the turning point for the world economy. Indeed, soon after those frantic weeks, an air of calm descended over markets.

But in the view of some sceptics, though those actions may have seemed successful in stabilising world markets, Mr Greenspan's deeds were, in fact, forced on him. Market interest rates had already fallen sharply in the month before the Fed cut rates. Likewise the decision to rescue LTCM was a fait accompli. A refusal to get involved would have been unthinkable. That was not how the debate seemed at the time inside or outside the Fed. On interest rates, there were those who were still arguing for caution, aware that, for all the turmoil, the US economy did not seem to have slowed at all. And the LTCM rescue was widely condemned at the time as an embarrassing piece of US "crony capitalism". (David Mullins, a former vice-chairman of the Fed and still a friend of Mr Greenspan, was on LTCM's board). But most economists believe the Fed's actions were neither wrong nor dictated for it by events.

"In the circumstances, the moves were essentially the right ones - and not necessarily all that easy to make," said Lawrence Lindsey, a former Fed governor.

In fact the chairman again demonstrated through the crisis another characteristic of his tenure at the Fed.

He has repeatedly shown in the past few years that he is not, as some central bankers have been, "obsessed" with inflation. Before the crisis intensified this summer, Mr Greenspan had been under heavy pressure to raise interest rates to curb the rapid US expansion. Yet, in spite of an average annual growth rate of almost 4 per cent for the past three years, the Fed has raised interest rates only once - and then by just a quarter of a point.

As a result the economy has been allowed to grow much faster than it would otherwise have done, with no sign of inflationary ill-effects. Except, possibly, for one.

The most serious criticism of the Fed chairman focuses on the surging bull market. To many economists, the Fed has failed to prevent the greatest threat to the US economy. If it had moved earlier to squeeze liquidity in asset markets, it might have been able to deflate the "bubble" gently. When prices fall the impact on the economy will kill off the expansion and - in the process - destroy Mr Greenspan's reputation. Paradoxically, Mr Greenspan's success in 1998 may have made this more acute. By steering so adeptly through the conflicting currents, he may have increased the market's perception (or delusion) that risks are a thing of the past, pushing up share prices to even riskier levels and making the pain of any future bust all the greater.

There are those naysayers who argue that 1998 will be seen as the year in which the seeds of economic destruction were sown. To quote the London-based Financial Times:

"They say Mr. Greenspan has allowed a stock market bubble to inflate; and far from rescuing the world from collapse in 1998, he has significantly raised the possibility that when the end of this long U.S. expansion eventually comes, the fall will be greater than ever. They argue that 1998 will be remembered not as the Great Greenspan World Economic Rescue, but as the Year of the Great Greenspan Bubble."

We all know a bubble when we see one. And you have to be blind not to see one in the current Internet-stock craze. But Alan Greenspan had about as much to do with this as Santa Claus did.

What the Fed boss did do was stabilize a global financial system that was on the verge of spinning out of control and restore confidence on both Wall Street and Main Street by aggressively lowering interest rates. These actions have added new life to the economic expansion that we have enjoyed for so long, new life to both our stock and bond markets.

The Fed chairman has been troubled by the stock market for at least the last two years. But economists at the Fed, who have looked at the implications of past bubbles, seem to have concluded that, for all the dangers, there is very little they can do. Raising interest rates to prick an asset bubble when inflation is low requires an almost impossible task of fine-tuning. Raise them a fraction too high, and the bubble bursts with damaging consequences. Raise them a little, but not enough, and you risk hurting the real economy without addressing the market problem. The central bank's inability to deflate bubbles gently points up one of the ironies of Mr Greenspan's standing in world financial markets. His stewardship of US monetary policy has been so effective that investors seem to have placed their confidence - and their money - in his ability to get judgments right. "Markets everywhere have been levitated by a kind of touching belief in the omniscience of Alan Greenspan," says Mr Lindsey. The irony is that the higher the markets go, the less chance the omniscient Mr Greenspan has to prevent a serious financial accident.