Posted By thestatedtruth.com on August 1, 2010

Here are some of the comments from Alan Greenspan on NBC’s “Meet The Press”.   We should keep in mind that Alan Greenspan told congress a year or two back that his “model” was broken!

Joshua Zumbrun         August 1, 2010

“We’re in a pause in a recovery, a modest recovery, but a pause in the modest recovery feels like a quasi-recession,” Greenspan said in an interview on NBC’s “Meet the Press.”

Asked if another economic contraction, a so-called “double dip,” was possible, Greenspan said, “It is possible if home prices go down.

“But right under this current price level, mainly 5, 7 or 8 percent below, is a very large block of mortgages, which are under water, so to speak, or could be under water. And that would induce a major increase in foreclosures, foreclosures would feed on the weakness in prices, and it would create a problem.”

Slowing economic growth, and a decline in housing activity following the expiration of a government tax credit, have raised fears that the economy could return to a recession before completing its recovery from the worst downturn since the 1930s.

“Our problem basically is that we have a very distorted economy,” Greenspan said. Any recovery has mostly been limited to large banks, large businesses and “high-income individuals who have just had $800 billion added to their 401(k)s, and are spending it and are carrying what consumption there is.”

“The rest of the economy, small business, small banks, and a very significant amount of the labor force, which is in tragic unemployment, long term unemployment — that is pulling the economy apart,” Greenspan said.

“There’s nothing out there that I can see which will alter the trend or the level of unemployment,” he said.

Greenspan repeated his warning that fiscal deficits could push up long-term interest rates and threaten the recovery.

The Financial System is ‘Broke’   “At the moment, there is no sign of that,  meaning higher interest rates, basically because the financial system is broke, and you cannot have inflation if the financial system is not working.”

http://www.bloomberg.com/news/2010-08-01/greenspan-says-decline-in-u-s-home-prices-might-bring-back-the-recession.html

Categories: Commentary, Economy, Finance, Interest Rates, Bonds, National News, Pensions and Retirement, Real Estate, Uncategorized, Wall Street
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