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.I wonder if he gets weird looks these days from other economists.
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.