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Greenspan recession probability update alert!
Sunday, April 06, 2008
Geez, is it ever going to stop? This story from Reuters contains about the 23rd in the excruciatingly long series of recession predictions from former Fed Chairman Alan Greenspan.
Proving that he does indeed possess the ability to forecast in real time (but not very well), the latest recession probability update comes in at better than 50-50 odds for a recession sometime in the future.More than 50 percent chance of U.S. recession
Yes, real estate bubbles all around the world ... not his fault ... a "savings glut" ... long-term interest rates beyond his control ... the fall of the Berlin Wall ...
By Sonya Dowsett Sun Apr 6, 6:15 AM ET
MADRID (Reuters) - There is more than a 50 percent chance the United States could go into recession, former Federal Reserve chairman Alan Greenspan told El Pais newspaper in an interview published on Sunday.
However, the U.S. has not yet entered recessionary state marked by sharp falls in orders, strong rises in unemployment and intensive weakening of the economy, he said.
"We would have to see signs of this intensification: there are some, but not many yet," he said. "Therefore ... I would not describe the situation we are in as a recession, although the chances that we'll have one are more than 50 percent."
...
Turning to Europe, he pinpointed Spain as having a bigger real estate bubble than the United States, exposing it to the global credit squeeze.
"The real estate bubble in Spain has been bigger than most other European countries, even bigger than the one in the United States," he said. "In that sense, one would have to presume that there is more vulnerability."
This week's cartoon from The Economist:
8 comments:
Rather than asking Greenspan questions about the global economy and paying his astronomical speaking fee for the privelege of hearing the sound of his voice, I propose a viable alternative: a cheap, plastic Magic 8 Ball. Besides being more cost effective, I think the 8 Ball is just as accurate in its predictions. Here, I'll demonstrate:
Me: Is the US currently in a recession?
M8B: As I see it, yes
Me: Is Spain's real estate bubble larger than America's?
M8B: Better not tell you now
In this case, even though the 8 Ball ducked the Spain question, it appears to be clearer and more accurate on the US economy than Greenspan. Even better, I just saved $150,000. Feeling good about the 8 Ball, I decided to ask one more question:
Me: Is Greenspan primarily to blame for the current US economic troubles?
M8B: It is decidedly so
The Magic 8 Ball speaks the truth!
Why do people still care what he thinks? Although in this case he is actually correct, 100% is larger than 50%.
Greenspand endorsed Mccain!
tim, surely you realize that you're only adding to the problem about which you complain .. this seems self serving and highly appropriate...
Hey Tim, have a look at Greenspan's Op-Ed in Monday's FT!
The title: The Fed is Blameless on the Property Bubble
Spoiler alert: He doesn't admit any culpability.
I read the Greenspan FT article as well over at PrudentBear. The way Greenspan tells it, central banks are so utterly powerless that they might as well not exist at all. Yet somehow I doubt he subscribes to the Ron Paul viewpoint that the Fed should be abolished.
On Saturday I attended a foreclosure home auction run by the Real Estate Disposition Corp. (REDC). I stayed long enough to observe the disposition of 49 of the more than 100 properties auctioned off. The average sales price was $129,000. The average "previously valued to" number was $234,000. This was a 45% haircut.
I didn't inspect any of the properties, but afterwards drove by several higher priced condos in Clearwater Beach that had been auctioned off. They were very nicely situated with water views and the building was only 2 years old. If you drive up and down Gulf Blvd. you'll find numerous condos still being constructed.
It looks like we've only seen the beginnings of the price declines yet to come.
Exactly how does Greenspan reckon 50%?
To calculate a probability, you must know all of the potential outcomes (states).
Al Greenspan is not omniscient.
He has no way of knowing what will become of the billions of open transactions in the U.S. -- who will earn cash to pay their debts, who will default.
It's impossible to predict outcomes -- give probability -- for any future state of an Open System.
Yet, idiots often do this as they try to make themselves sound smarter than they are.
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