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Alan Greenspan Warns That Us Could Be Heading For Double-Dip Recession

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http://www.telegraph.co.uk/finance/economics/7921353/Alan-Greenspan-warns-that-US-could-be-heading-for-double-dip-recession.html

Amid worries about a slowdown in economic recovery, Mr Greenspan said: "We're in a pause in a recovery, a modest recovery but a pause in the modest recovery feels like a quasi-recession."

Questioned on NBC's Meet the Press programme about whether the US could slide into another recession he said: "It is possible if home prices go down. Home prices, as best we can judge, have really flattened out in the last year."

Mr Greenspan repeated an earlier warning about the risks of an increase in interest rates that could threaten recovery but added: "At the moment there is no sign of that because the financial system is broke and you cannot have inflation if the financial system is not working."

His comments came against the background of fears that the US recovery is running out of steam.

Figures released on Friday showed growth had slowed from an annual rate of 3.7pc in the first quarter to 2.4pc in the second and, although the Dow Jones Industrial Average recovered from a sharp initial fall, leading economists are pessimistic about the outlook.

Last month Mr Greenspan's successor Ben Bernanke told Congress that the economic outlook is "unusually uncertain".

His comments were seen as a signal that President Barack Obama may have to provide a further economic stimulus, a point echoed by the International Monetary Fund in its report on the US economy.

Mr Greenspan, who has been partially blamed for laying some of the foundations for the slide into financial chaos two years ago because he opposed controls over some of the financial instruments that caused the credit crisis, feels house prices hold the key to whether there is a double-dip recession.

He said that if prices stabilise "then I think we will skirt the worst of the housing problem."

But the risks of a major new round of foreclosures is hanging over the market because of negative equity on a large block of mortgages.

Mr Greenspan also expressed concern about the limited impact of stimulus measures.

"Our problem is that we have a very distorted economy," he said. Recovery had been limited to "large banks, large businesses and high income individuals."

The rest of the economy was being pulled apart amid tragic long-term unemployment, he added. "There's nothing out there that I can see which will alter the trend or the level of unemployment," he said.

Greenspan at his best again talking in riddles there is no recovery. We've had a stimulus recovery which has only helped certain sectors for the short term, long term there are still huge structural problems.

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http://www.telegraph.co.uk/finance/economics/7921353/Alan-Greenspan-warns-that-US-could-be-heading-for-double-dip-recession.html

Greenspan at his best again talking in riddles there is no recovery. We've had a stimulus recovery which has only helped certain sectors for the short term, long term there are still huge structural problems.

But wasn't Greenspan all about "large banks, large businesses and high income individuals"? Namely trickle-down economics

Has this 85yo now seen the light and realised that his life long beliefs were bunkum? Well i'll eat me hat :rolleyes:

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http://www.telegraph.co.uk/finance/comment/jeremy-warner/7923047/Alan-Greenspan-is-making-UK-weatherman-Michael-Fish-look-like-a-good-forecaster.html

Having puffed up the credit markets to the point where they were bound to go pop, the former Federal Reserve chairman has since taken his place on the drawing room wall as an antique barometer of the economic weather – much watched but somewhat unreliable. Right now his reading is for rain and more rain.

I'm not saying he's wrong, but a quick Google of Mr Greenspan's forecasting record strongly suggests there is a fault as deep now in his atmospheric readings as for much of the time he was running the Fed.

Even Michael Fish (a UK weather forecaster who famously told us there was no hurricane in the offing just hours before the Great Storm of 1987) gets it more right than the former Fed boss.

Mr Greenspan's warnings over the weekend that the US economy may be heading for a double dip smacks not just of clambering aboard the bandwagon – he's somewhat late in his observations - but comes just four months after he cheerfully announced that the odds of a double dip "have fallen very significantly" as a result of a shortage of inventories, which he insisted would produce a "self reinforcing cycle".

Now he says we are in a pause in a modest recovery, "but a pause in a modest recovery feels like a quasi-recession". I shouldn't mock, for my own forecasting record is if anything even worse, but in March 2007, Mr Greenspan said there was only a one third chance of a recession, only to raise this to a greater than 50pc chance in May 2008.

Starting to get it right, then? Unfortunately he then spoilt this rare insight into the blindingly obvious by saying that prospects of a severe recession had receded markedly. As we know, the worst recession since the Great Depression followed soon afterwards.

In November 2006 he referred to the economic slowdown as "likely temporary", and in June 2007 he said that China was a bubble and that a "dramatic contraction is coming". For all his wisdom and experience, Mr Greenspan doesn't seem to have learned the first lesson of forecasting – it's a mug's game.

Central bankers are required to take a view, but in fact they might do better simply to react to the world as it is than as they think it will become. Paying more attention to the present while he was at the Fed might have alerted Mr Greenspan to out of control credit and the need to reign it in. Throughout much of his time at the Fed he did the reverse.

Mr Greenspan's all absorbing mission since then has been to defend his legacy, and to the extent that he admits to getting it wrong at all, to insist this was all a perfectly sensible approach to policy at the time.

He's not alone. Most central bankers will still claim that accommodative monetary policy played little if any part in causing the crisis, or alternatively that they had no option but to adopt such a stance, for to do otherwise would have induced a recession.

Both Ben Bernanke, the present Fed chairman, and Mervyn King, Governor of the Bank of England, argue that it was widening trade imbalances and associated capital flows which were the root cause.

A recent paper by the International Monetary Fund, "Central Banking Lessons from the Crisis", is ambiguous in its conclusions. Citing recent research, it finds only limited evidence that overly accommodative interest rate policy fuelled the bubble in individual countries, but stronger evidence that the global climate of loose money did have a significant effect. In other words, this was not just about failures in banking supervision. Central bankers were part of the mischief.

More at the link.

I'm sure Greenspan has been paid rather handsomely for his predictions because he was head of the FED.

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http://globaleconomicanalysis.blogspot.com/2010/08/is-this-quasi-recession-or-simply.html

Alan Greenspan is back mincing words. The big difference since Greenspan left the Fed is that his words are now understandable. It's a huge improvement.

Please consider Greenspan Sees Quasi Recession

The dollar traded near its weakest since November against the yen on signs the U.S. recovery is losing momentum and after Former Federal Reserve Chairman Alan Greenspan said the slowdown feels like a “quasi recession.”

The U.S. economy might contract again if home prices decline, Greenspan said in an interview on NBC’s “Meet the Press” yesterday. “We’re in a pause in a recovery, a modest recovery, but a pause in the modest recovery feels like a quasi- recession,” he said.

Fed Chairman Ben S. Bernanke will speak today on “Challenges for the Economy and State Governments” in Charleston, South Carolina.

Recession, Quasi Recession, or Quasi Recovery?

I believe the word "recession" fits the bill better than the term "quasi recession". Of course, this all depends on your definition of recession as well as the meaning of "quasi". A quick dictionary check of "quasi" shows the meaning is "resembling; seeming;"

This sure does seem like a recession. However, please note that the NBER has still not proclaimed the end of the recession that started in 2007. Thus, it is quite likely that the US is still in recession and "quasi" needs to be dropped.

At least Greenspan minced words in the proper direction. For example "Quasi Recovery" would mean something that "seems like a recovery" even though it isn't.

This sure does not "seem like" a recovery, for the simple reason it isn't, at least in any practical sense, regardless of what the NBER may decide. However, we did have a recovery on Wall Street, amidst a series of high-fives, but Main Street America has not benefited much it at all.

Mish on Greenspan.

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  • 150 Brexit, House prices and Summer 2020

    1. 1. Including the effects Brexit, where do you think average UK house prices will be relative to now in June 2020?


      • down 5% +
      • down 2.5%
      • Even
      • up 2.5%
      • up 5%



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