Alan Greenspan warns that US could be heading for double-dip recession
By Roland Gribben|Telegraph.co.uk
Alan Greenspan, former chairman of the US Federal Reserve, has added his weight to warnings that the US economy may be heading for a double-dip recession.
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
If we’re going to another stimulus after the last one didn’t work… Let’s take 1 trillion dollars and give it to all the citizens over 50… Let’s thank them for a lifetime of work, and building our way of life… Then when they clear out of all their jobs, POW, no more job shortage… When they all buy a house… POW!!! No more real estate problem… Most of them will purchase things and send the money straight back into the economy… WOOHOO… So it will get to the businesses after a little while…
You know what, this entire topic makes me angry… Recession??? What the hell is a recession??? We have so many different things available to us that we didn’t have 150 years ago… Our ancestors lived on a lot less then we have now..
The recession was created through slow and deliberate manipulations by corporations who wanted an extra boost. And how important are these corporations? They would like us to think that modern day corporations falling would create a domino effect destroying trillion dollar a year businesses. This of course could happen, but how many people do they employ? Let us assume that a corporation that employs 10,000 people falls dead. This is 10,000 people out of work and an industry that loses a player. 10,000 people out of work is pretty bad. So this corporation wants to be bailed out. Ten thousand people losing their jobs is a lot of people and so they ask for 600 billion dollars. Six hundred billion dollars may or may not get them out of the hole. If it doesn’t, then we are out six hundred billion dollars. So how important are these 10,000 jobs?
Let’s do a little math on the subject. If we give 600,000,000,000 dollars to this company to save it from crumbling other corporations and save 10,000 jobs. Lets divide. We could give each worker 60 million dollars with 600 billion. So lets take down a notch. What if we let the corporations fall, and give out small business loans of 60,000 dollars to 10 million people who want to start up a small business. NOW THAT WOULD FIX THE ECONOMY!!!
But this is of course only a few years old when corporations decided to let the politicians bail them out. Of course they deserved it because of all that lobbying. Quid pro quo is the way of the world.
Lets go back to the beginning, shall we?
A long time ago money was made and purchases were made after the money was made. Sounds weird doesn’t it? It’s true, I swear it on my great uncle’s roommate’s grave. Then credit was invented. Now credit, in it’s infancy was innocent. In fact it remained innocent for about 100 years until the some greedy bankers thought of lending out credit and promoted the buy now, pay later attitude. Then their idea took off when the magnetic credit card strip was invented. Before that, paying with a credit card was a hassle no one would wish on their worst enemy. With that, the economy BOOMED!!! And why shouldn’t it. People were spending money they didn’t have and it was backed by the banks. The consequence of this wasn’t realized until everyone was maxed out. The purchases stopped because people can only buy so much stuff they need to pay back.
So now everybody is paying money back to the banks they borrowed from at high interest rates, and the banks really don’t produce anything. So now business is slowing down across the nation and we live on a credit based economy. In fact, it’s difficult to buy anything unless you have a good credit score. With business slowing down, some greedy companies who manage an oligopoly, decided to make some money. The oil companies banded together and made 4.00 a gallon gas prices. This was a mistake of biblical proportions. Sure, they made billions, but what happened later? (If you notice, the oil companies are taking it in shorts to help the economy as gas prices this summer are really low. They are being somewhat held accountable.) The oil companies taxed the entire nation to much.
From the bottom.
Workers stopped buying extra things, going out to dinner, and spending extra money. Because they were putting that money in their tank.
Businesses were hit hard when customers stopped coming in. Then they got slapped by a higher overhead for hauling what they needed because of the gas prices. They were making less money, and paying out more in expenses.
As if it couldn’t get any worse! But it did! Corporations were starting suffer around 2008 and so they created a campaign spreading fear about the recession. The recession really wasn’t all that bad, but the corporations were suffering. Fear everywhere. Watch the news, and there is nothing but nasty stuff going on. Watch a TV show, and you get to hear about the recession, and people out of work, and so on. Fear Fear FEAR FEAR FEAR!!!! “Spread the fear, and we can get the people to approve of giving us a trillion dollars.” While this was going on, stimulus was praised as a word above all words. We were told the only way out is the stimulus. Approve we did. We elected obama into office for the specific purpose of initiating the stimulus. Stimulus granted.
Thank you for baring through my history lecture which is according to me. Where are we now? Stimulus did not work, because people are scared and not spending money. Money exchanging hands is how the economy works. Now there are efforts to convince people the economy is getting better, but they are lies and the people know that they are lies. The corporations have exhausted the first stimulus payments, and think they can do better with another trillion dollars.
Oh PLEASE!!! We will get the same result if we give them more money.
So let me reiterate! We have a wonderful economy right now, and no one really knows it because they have been taught otherwise. People just aren’t grateful for what they have anymore. If each person in the country spends 100 dollars that is 30 billion dollars pumped into the economy and it will change hands several times. All the fear we have about the economy was given to us through people who wanted to profit on our fears.
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