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Greenspan: " Dramatic Drop In Chinese Stocks "

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Thursday May 24, 02:03 AM


Greenspan sees
drop in Chinese stocks
MADRID (Reuters) - Former U.S. Federal Reserve Chairman Alan Greenspan said on Wednesday he feared a "dramatic contraction" in Chinese stocks but said the global economy may be able to shrug off a drop in asset prices.
Addressing a meeting in Madrid via teleconference, Greenspan said the recent boom in Chinese stocks could not last.
"It is clearly unsustainable," he said "There's going to be a dramatic contraction at some point."
The main Shanghai index <.SSEC> has nearly tripled in past year and is up 56 percent so far in 2007.
Greenspan also said a correction could cause problems for Chinese personal wealth. Some analysts have speculated that the Chinese government could be tempted to dip into its reserves to bail out any stung investors and avoid social unrest.
Greenspan, who stood down as Fed governor last year, said cheap Chinese imports were one of the elements stoking world growth, along with Eastern European workers and the knock-on effects on lower inflation and rates.
"In the last five years, the world as a whole is a growing faster than at any time in the world's history," he said. "It can't last and it won't last because it's a one-shot adjustment."
Greenspan said asset prices around the world could fall but that the economy may escape unscathed if it were flexible enough to absorb asset price shocks.
"We will get major declines in certain levels but it need not feed back significantly to levels of employment or the real economy," he said.
Earlier this month, Greenspan reiterated that he believed there was a one-third chance the U.S. economy, the world's largest, would slip into recession this year.
On Wednesday, he said the United States had no problem financing its current account deficit.
"I am ... not particularly concerned about the current account deficit per se. I think that is essentially a market force," he said, adding that the budget deficit worried him more.
Asked about oil prices, which rose strongly last year and were around $70 a barrel on Wednesday, Greenspan said: "The problem of crude oil is not that we're peaking or running out of oil, we're not, the problem of oil is access."
He saw difficulties ahead for world energy markets over coming years if geopolitical issues continued to plague major suppliers and investment remained at insufficient levels.


Edited by Realistbear

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Whether Big Al was right or not prior to his statement, the words are now out of his mouth and it is what people believe that will determine whether the warning was justified. The poll shows most think Big Al is right:


Former Fed Chairman Alan Greenspan warned on Wednesday that there would be a "dramatic contraction" in Chinese stocks. Is he right?
Yes 70%
No 31%
11951 Votes to date


Global shares wilt
Shanghai stocks
dropped by 1.6 percent today after former Federal Reserve chairman Alan Greenspan said China's booming market could be headed for a "dramatic contraction."
Other Asian markets also struggled. "His comments sent a little bit of a shiver across the global markets," said Lucinda Chan of Macquarie Equities in Sydney. (MarketWatch) European shares edged lower in early trading. (Bloomberg) U.S. stocks lost gains fueled by takeover news after Greenspan's remarks yesterday. (AP in Yahoo! Finance) U.S. stock futures edged lower, as luxury homebuilder Toll Brothers added to the gloom by reporting that the housing downturn sent its quarterly profits plummeting more than expected. (MarketWatch)
Edited by Realistbear

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Greenspan. This man has sold out to the globalists. I don't know how he can sleep at night having done what he has to the US economy. He was the architect of the greatest period of credit creation in all of history. This was in spite of writing about the evils of fiat paper money earlier in life was he was still an honourable man



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This is the translation of the song thats being circulated round the internet - must be almost a crazy as our HP bubble huh?


Lyrics to a song meant to be sung to the tune of China's national anthem, "The March of the Volunteers," are circulating on the Internet.

"The Song of the Stock Market" Author unknown

Arise Ye who haven't got stock accounts! Invest all your money in the bull market; The Chinese people have reached the most crazy moment, Everyone with enthusiasm shouts the shout of buying. "Arise, Arise, Arise!" Our millions of people are of one mind, cherishing the dream of overnight wealth. March on! March on! March on!

Arise, Ye who do not want to be poor, To build our Great Wall of stock with our blood money The Chinese people are experiencing the most crazy market, Everyone with jealousy shouts the crazy shout. March on! March on! March on! United we buy, without considering the risk of being trapped. March on! March on! March on!

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