Wikinvest Wire

Greenspan recession probability update alert!

Tuesday, May 27, 2008

It's been at least a few weeks since the former Fed chairman weighed in on the likelihood of a recession in the U.S. This report from Reuters confirms what many former Fed watchers have suspected - there's still better than a 50-50 chance.

"I still believe there is a greater than 50 percent probability of recession," Greenspan told the Financial Times in an interview published on the newspaper's website.

"(But) that probability has receded a little and I think the probability of a severe recession has come down markedly," said Greenspan.
He said it was "too soon to tell" whether the worst of the financial crisis was over as this would depend on what happened to house prices.

The Financial Times said Greenspan estimated house prices would fall by another 10 percent from their February levels, for a total peak-to-trough decline of roughly 25 percent.
Too sharp of an increase in the savings rate (after tax income minus consumption) was cited as the main risk to his current economic forecast.

Translation: if people start living within their means, we're in real trouble.

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3 comments:

sbvor said...

It is increasingly unlikely that we are currently in a recession or that we will be at any point in 2008:
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The Recession of 2008 That Wasn’t?
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little larry sellers said...

Just like professional wrestlers, Greenspan should have theme music playing whenever he enters a room. Is it too late to request Fleetwood Mac's "Little Lies" as his theme song?

sbvor,

Keep telling yourself that the government doesn't manipulate data to no end. As for media "hysteria", it is a selective outcry in an election year that misses the big picture. In reality, we're not talking about the probability of a recession, we're talking about the probability of a complete economic meltdown and the end of the "American way of life" as we know it.

Get back to us by the end of the year and let us know how you think 2008 turned out.

SBVOR said...

Little Larry,

Hmm…
Which horse to back?

You? Or, the professionals at The Conference Board who, for “over 90 years”, have made their living providing accurate economic forecasts?

Gee, tough choice! But, I think I’ll go with the forecast from The Conference Board.

Earlier this year, when your side was warning that we were already in recession and that it would be “the worst recession since World War II”, The Conference Board quietly (because the media had no interest in hearing it) predicted 0.4% GDP growth for Q1 of 2008. The “advance” report was 0.6% and the “preliminary” report report bumped that up to 0.9%. The “final” report for Q1 is due on 6/26/08.

So, if anything, this suggests that the forecast from The Conference Board for continued economic growth through 2008 and 2009 may be understated.

I know it will make you sad, but it looks like your side failed to talk the nation into recession. Thank goodness for that.

Sorry Larry Little, but the sky is NOT falling!

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