Former Federal Reserve Chairman Alan Greenspan suggests to George Stephanopoulos that "there's been a very significant improvement in the financial system... where the problems have been," and that as far as the retracting economy: "I'm pretty sure we've already seen the bottom... Collapse is now off the table."
"The state of confidence in the economy is beginning to pick up," he suggests.
Bloomberg reports:
Aug. 2 (Bloomberg) -- The most severe recession in at least five decades may be ending and growth may resume at a rate faster than most economists foresee, former Federal Reserve Chairman Alan Greenspan said.
“We may very well have 2.5 percent in the current quarter,” Greenspan said in an interview today on ABC’s “This Week” program. “The reason is there has been such an extraordinarily high rate of inventory liquidation that the production levels are well under consumption.”
The U.S. economy contracted at a better-than-forecast 1 percent annual pace in the second quarter, the Commerce Department reported July 31. Stabilization of housing markets and consumer spending, a lessening of financial turmoil and increased government spending all suggest the longest recession since the 1930s may be close to ending.
“I’m short-term optimistic, but with many caveats,” the former Fed chairman said. Housing markets have “stabilized temporarily” though it is “possible” the economy might relapse if there is a further slide in home prices of more than about 5 percent.
‘Close to Stabilization’
“I don’t think it’s going to happen, but I do think it is possible that we could get a second wave down,” he said. “But the important issue is that if we don’t, and I think the probability is that we won’t, that we are close to stabilization.”
Economic growth will average 1 percent in the current quarter, according to a Bloomberg News survey of economists in July.
“I’m pretty sure we’ve already seen the bottom,” Greenspan said. “In fact, if you look at the weekly production figures for various different industries, it’s clear that we’ve turned, perhaps in the middle of last month, the middle of July.”
He predicted “the unemployment rate is going to continue to rise, but more slowly than it’s been. We’ll continue to have job loss, but that’s slowing as well.”
Fed Chairman Ben S. Bernanke projected a week ago the U.S. unemployment rate will top 10 percent, up from 9.5 percent in June, even as the economy recovers. Growth of about 1 percent is likely in the second half of the year, Bernanke said at a town- hall-style meeting.
In my Tract The Age of Turbulence: Plea for a New World Economic Order, I explain the nature and causes of economic depressions.
ReplyDeleteIt proves that after the inflation of the Mother of all Asset Price Bubbles the ominous fate of this economy is Keynes' Liquidity Trap.
Its consequences are a new, bigger Crash causing, this time, a real Great Depression II.
A turbulence in fluid mechanic is a chaotic state of a liquid. It Owns Most of the Proprieties of The Liquidity Trap, Origin of The Crash, it is a filled with Random Phenomenon and Discontinuities.
What do we do Before The Crash?
Preparing for the Crash, The Age of Turbulence. Proposes a way to profit from The Crash.
Using the yield curve as a predictor that strategy covers Treasuries, Corporate Bonds, Minerals (Oil, Precious Metals and Base Metals.) and Stocks.
Its aim is to profit from both the Asset Price Bubble and Irrational Exuberance and The Crash and Economic Depression that will necessarily ensue.
It tries, and for the time being very profitably, to accomplish Alan Greenspan Mission Impossible:
"That is mission impossible. Indeed, the international financial community has made numerous efforts in recent years to establish such oversight, but none prevented or ameliorated the crisis that began last summer.
Much as we might wish otherwise, policy makers cannot reliably anticipate financial or economic shocks or the consequences of economic imbalances.
Financial crises are characterised by discontinuous breaks in market pricing the timing of which by definition must be unanticipated - if people see them coming, then the markets arbitrage them away."
....
The clear evidence of underpricing of risk did not prod private sector risk management to tighten the reins.
In retrospect, it appears that the most market-savvy managers, although conscious that they were taking extraordinary risks, succumbed to the concern that unless they continued to "get up and dance", as ex-Citigroup CEO Chuck Prince memorably put it, they would irretrievably lose market share.
Instead, they gambled that they could keep adding to their risky positions and still sell them out before the deluge. Most were wrong."
Alan Greenspan
The Age of Turbulence: Adventures in a New World [Economic Order?].
But what do we do After The Crash?
ReplyDeleteI propose a plausible alternative solution to the Depression: I designed a System that will allow us, when The Crash will come, to get out of Credit Based Free Market Economy, Capitalism, and transfer to my Adjusted Credit Free, Free Market Economy and Abolish the FED:
To participate in our new economy you need to Enter Your €5 in The Cra$h R€gi$t€r. Before The Crash.
I.10.82
"People of the same trade seldom meet together, even for merriment and diversion, but the conversation ends in a conspiracy against the public, or in some contrivance to raise prices.
It is impossible indeed to prevent such meetings, by any law which either could be executed, or would be consistent with liberty and justice.
But though the law cannot hinder people of the same trade from sometimes assembling together, it ought to do nothing to facilitate such assemblies; much less to render them necessary.
I.10.83
A regulation which obliges all those of the same trade in a particular town to enter their names and places of abode in a public register, facilitates such assemblies. It connects individuals who might never otherwise be known to one another, and gives every man of the trade a direction where to find every other man of it.
I.10.84
A regulation which enables those of the same trade to tax themselves in order to provide for their poor, their sick, their widows and orphans, by giving them a common interest to manage, renders such assemblies necessary."
Adam Smith
June 5th, 1723 – July 17tn, 1790
An Inquiry Into the Nature and Causes of the Wealth of Nations.
Inequalities Occasioned by the Policy of Europe.
March 9th, 1776
Buy Now The Tract That Will Be Published September 17th, 2009.
You will enjoy my popular articles:
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Ron Paul vs. Bernanke.
Ben "Systemic" Bernanke.