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Greenspan: A once-in-a-century event

Wednesday, February 18, 2009

The condensed wisdom of former Fed chairman Alan Greenspan from this Bloomberg report on yesterday's gathering at the Economic Club of New York:

What we are currently going through is a once-in-a-century type of event. It will pass ... Given the Japanese experience of the 1990s, we need to assure that the repair of the financial system precedes the onset of any major fiscal stimulus.

To stabilize the banking system and restore normal lending, additional TARP funds will be required ... Banks are not going to increase their lending until they feel comfortable with the amount of capital they hold. That’s not going to happen for a while.

Until we can stabilize the asset side of bank balance sheets, this crisis will not come to a close ... Unfortunately, the prospect of stable home prices remains many months in the future. Many forecasters project a decline in home prices of 10 percent or more from current levels.

Certainly, by any historical measure, world stock prices are cheap. But as history also counsels they could get a lot cheaper before they turn ... A rise in equity prices could help offset the impact of falling house prices.

The recent rise of long-term interest rates appears to be signaling market concerns about inflationary pressures. It could turn out to be the canary in the coal mine.

The regulatory structures, especially internationally, were way behind the curve ...
There is a general belief that somehow we can regulate very complex organizations, and we can’t. What we’ve got to do is to try to make them more efficient, to put far more capital into these organizations.
I wonder if he gets weird looks these days from other economists.

5 comments:

Nostradamus, apparently said...

I can't remember the rules for 'Greenspan' and 'mess' sightings. Here's one from the Prudent Bear that has them within 69 words of each other:

http://www.prudentbear.com/index.php/commentary/creditbubblebulletin?art_id=10191

(You have to scroll way down to his commentary on the page.)

Greenspan is finally seen by most people as the old fool he always was. His recent comments boil down to:

"It might get worse or it might get better."

Thanks, again, Alan.

It's time for him to just go away and shut up.

Narcissists don't do that very well...

braco matkov said...

You missed the best part:

http://www.cnbc.com/id/15840232?video=1038295405

where he describes how traders were willing to risk default of their institutions once every 100 years. Academic exercise indeed.

dm

Anonymous said...

Campaign to Cancel the Washington National Debt By Constitutional Amendment Begins in the U.S.
See the following URL for more information:
http://www.facebook.com/group.php?gid=67594690498&ref=ts

It is time to give up on Congress already controlled by the special banking and Wall Street elites who pushed the debt to unsustainable levels against the will of the American people and then bailed themselves out with trillions of dollars in more national debt on this and future generations. The only way to control and cancel much of the Washington government debt is to pass “The Washington National Debt Constitutional Amendment” in 2/3 of the states and repudiate much of the Washington treasury debt before it bankrupts every private American citizen.

The Campaign will bypass a corrupt Congress and the leadership of both political parties often controlled by special interests at the national level and seek a debt solution through the constitutional amendment process starting at the state level which will repudiate any Treasury debt issued or rolled over after the deadline of 12/22/2013, exactly 100 years after the establishment of the Federal Reserve System. We fear the massive increase in the level of indebtedness due to the meltdown and depression will first bring down the Treasury market followed by the US dollar and this will destroy the American economy for years to come.
America is living with a financial threat much like people living below a dam which is about to burst. Should we take control of the situation and release the water pressure on the dam with a controlled release at the time of our choosing after the threatened population have moved everything of value out of the flood path or wait until the structure collapses and the flood washes away everything of value.

More information will be announced soon!

Anthony J. Alfidi said...

The Maestro's advocacy of more TARP injections is prima facie evidence of intellectual bankruptcy.

acai berry said...

To Anonymous. Guess what? The structure has collapsed and the economy is essentially destroyed for years to come. As for Alan Greenspan...does anyone remember when he essentially endorsed ARM mortgages and other non-fixed mortgages at a time when the mortgage rates were at historic lows? That was economic malpractice. He was shilling for the Bush administration as he helped creat an illusion of a growing economy that was based on pulling equity out of overpriced real estate, not real growth. One big fraud.

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