Monday, February 26, 2007

Bearish Greenspan?

The AP reports today on an interesting comment by Alan Greenspan:
Greenspan Warns of Likely U.S. Recession

HONG KONG -- Former U.S. Federal Reserve Chairman Alan Greenspan warned Monday that the American economy might slip into recession by year's end.

He said the U.S. economy has been expanding since 2001 and that there are signs the current economic cycle is coming to an end.

"When you get this far away from a recession invariably forces build up for the next recession, and indeed we are beginning to see that sign," Greenspan said via satellite link to a business conference in Hong Kong. "For example in the U.S., profit margins ... have begun to stabilize, which is an early sign we are in the later stages of a cycle."

"While, yes, it is possible we can get a recession in the latter months of 2007, most forecasters are not making that judgment and indeed are projecting forward into 2008 ... with some slowdown," he said.

Greenspan said that while it would be "very precarious" to try to forecast that far into the future, he could not rule out the possibility of a recession late this year.
Okay, there's a bit of a difference between "not ruling out the possibility of a recession" and actually predicting a recession, but it still seems to be a rather darker reading of the US economy than was typical for Greenspan while he was Fed chair.

The thing is, his points make a fair bit of sense, and I suspect that he might be right on this one.

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