Markets

U.S. open in 8 hrs, 3 mins

DJIA

10,433.71

-17.24

0.16%

NASDAQ

2,169.18

-6.83

0.31%

S&P 500

1,105.65

-0.59

0.05%

10yr Note

100.594

0.4062

0.41%

FTSE 100

5,323.96

-31.54

0.59%

Nikkei 225

9,441.64

40.06

0.43%

Hang Seng

22,381.91

-41.23

0.18%

Euro (in USD)

1.496

0.0005

0.03%

Yen (per USD)

88.49

-0.54

0.61%

Gold

1,165.50

0.00

0.00%

Oil

76.21

0.19

0.25%

BUSINESS NEWS

INVESTING

Financial Glossary

PERSONAL FINANCE AT WALLETPOP

SMALL BUSINESS

Greenspan Says Recession Odds Higher

Reuters

Posted: 2007-09-28 07:13:57

LONDON (Sept. 28) - The probability of a recession in the United States has increased but is still less than 50/50, former Federal Reserve Chairman Alan Greenspan said in comments broadcast on Friday.

Getty Images

Greenspan said he expects consumer spending to slow as the housing market slowdown "significantly" reduces the 'wealth effect' but is still not convinced that will lead the world's largest economy to contract.

"The danger of recession has obviously risen but in my judgment ... is still less than 50/50. It's less optimistic than one would like," Greenspan told BBC Radio 4.

The U.S. Federal Reserve slashed interest rates last week by 50 basis points to 4.75 percent in a bid to shield the economy from the fallout of the credit crisis that's swept through financial markets in recent months.

The U.S. economy is shifting into a slower gear, in large part because of the sharp slowdown in the housing market. There are worries that a similar scenario could play out in Britain too.

But when asked if he expected a UK housing market crash, the former Fed chief said such a bleak outlook was premature.

"The probabilities have risen but I'm scarcely at the point where I'm forecasting (that) we're about to experience significant recessions either in the United States or in Britain," he said.

Still, he recognized that all asset bubbles, be they in residential housing, equity or real estate markets, will probably burst if you let them expand long enough.

Greenspan, himself often criticized for slashing interest rates too quickly in response to signs of financial or economic weakness, said central banks face a tough task in managing these bubbles resulting from the long-term trend of globalization and decline in real interest rates.

"It's the consequence of ... a dramatic decline in real interest rates. It's really not something which central banks any longer have control over."

On the current financial market turmoil sparked by a collapse in the risky U.S. mortgage sector, Greenspan said he had little sympathy for the hedge fund community which was "presumably the largest culprit" behind it.

He wasn't concerned at seeing these wealthy investors' net worth dwindle, but argued that their role in greasing the wheels of the global financial system is still crucial and beneficial.

"The key aspect of finance is to create a movement of a nation's savings into productive, physical assets which produce productivity," he said.

Copyright 2008 Reuters Limited. All rights reserved. Republication or redistribution of Reuters content, including by framing or similar means, is expressly prohibited without the prior written consent of Reuters. Reuters shall not be liable for any errors or delays in the content, or for any actions taken in reliance thereon. All active hyperlinks have been inserted by AOL.

2007-09-28 06:53:07

Must Read?

0 %

0 VOTES

Recent Comments

Post Your Own

1 - 10 of 39

39 comments

Sarai1313 09:23:36 PM Sep 30 2007

Report This!

give me brake the only ones talking any sence are the ones from michigan. who are seeing it up close. it is not greenspans problem that bush and so meny thoers take his words and twist them to mean what they thought he said

gmcmccollum 10:28:01 PM Sep 28 2007

Report This!

If there s a resession, ... there's a good reason for it. We, as american's, purchase everything from foreign countries, ie: Japan, Europe, Asia, China, etc.,etc. If you don't buy american what the hell do you expect ! They increase the price because STUPID AMERICAN'S buy their junk !

MIZSWEETS925 06:26:00 PM Sep 28 2007

Report This!

I BELEIVE WE ARE IN TROUBLE,IN MICHIGAN RIGHT NOW WE HAVE RAMPENT UNEMPLOYMENT,FORECLOSURES EVERYWHERE,SMALL BUSINESSES CLOSING,AND JUST TONIGHT I LOOKED AT THE LOTTERY SITE AND GRANHOLM DECLARED AS OF OCT 1 IF A BUDGET DOESNT PASS THEY WILL SHUT DOWN THE LOTTERY SALES.AND ALL NON EMERGENCY STATE RUN FUNCTIONS,SOON THE SCHOOLS WHICH BENIFIT FROM THE LOTTERY WILL SUFFER AND SO ON AND SO FORTH...... WAKE UP !! IF IT'S NOT IN YOUR STATE YET,WELL...IT WILL COME SOON!! OUR STATE IS IN DEEP S**T

jsteel57 06:03:05 PM Sep 28 2007

Report This!

with all your money alan why don't you buy yourself a pair of glasses from this century

jsteel57 06:02:01 PM Sep 28 2007

Report This!

you're a joke alan just like your big ears

nezperze 05:42:00 PM Sep 28 2007

Report This!

Recession is Coming???? It arrived last year with record foreclosures. Many US jobs "outsourced" to foreign countries . And the housing market in shambes. 750 BILLION spent on wars...that are LOST. What else is going to happen?

ulove726 05:35:10 PM Sep 28 2007

Report This!

I couldn't agree with you more ....Attractiveinc. What amazes me is why so many people just can't see this. I know the day Bush was elected my Coworker and myself said to one another...Here come's the recession and depression.Guess what here where I live ( Michigan ) that is exactly what is happening.Jobs gone...Homes foreclosing...Goverment is Lansing talking about closing and is it just coincidence this just happen since Bush took office? Wakle Up people! Things were going good when Clinton was President.

rtpkjw 05:05:00 PM Sep 28 2007

Report This!

Dear Mr Greenspan,
Retire you old fart, noone cares what you have to say anymore!

agaube 02:09:02 PM Sep 28 2007

Report This!

i agree with sphil66183

DawnAshley 02:04:00 PM Sep 28 2007

Report This!

Greenapan misses the attention. He reminds me of the weather prognosticator's that create storms to talk about which prompts the insurance companies to raise rates or the media that reports that oil prices will hit $100 a barrel so that gas prices rise. Greenspan needs to learn to shut is damn negative mouth.
Go sell your book on Al Gore's shirt tail lord knows he has all the means to cry wolf every day of the week to those that listen to these fools.

1 - 10 of 39

39 comments