I’m not certain I would give Greenspan great market as a stock market seer, but he may have gotten better over time. He saw the stock market as frothy in 1996 (the time of his famed “irrational exuberance” remark, and was a skeptic through most of the equity bubble, then threw in the towel and decided he was a believer less than 6 months before the market top.
Nevertheless, the Maestro seems to be calling an end to the current rally, based on his view that the fundamentals will not pan out and growth will falter next year. He sees growth coming in at 3% to 4% over the next two quarters, but as Ed Harrison has pointed out, a big chunk of that is “the mother of all inventory corrections.”
Former Federal Reserve Chairman Alan Greenspan said he sees the U.S. economy slowing next year as the surge in stocks comes to an end.
“The odds are that we flatten out, even though earnings are doing very well,” Greenspan said in an interview with Bloomberg Television, referring to the equity market. That flattening out will probably “put some sort of dull face” on the economy in 2010, he added.
Greenspan said he expects the economy to grow at a 3 percent to 4 percent annual pace in the next sixth months before slowing down. As a result, unemployment isn’t likely to decline much from last month’s 9.7 percent rate, he said. Even so, he doesn’t expect the economy to relapse into recession next year.
The world’s largest economy shrank at a 0.7 percent annual rate from April through June, the best performance in more than a year, the Commerce Department said today. An unexpected decline in a gauge of business activity released today, along with a private report showing employers cut more jobs than forecast, indicate a recovery may be slow to take hold….
“We are still by any measure in a disinflationary environment,” said Greenspan, 83. “Unless we sterilize or unwind the big monetary base we’ve built up, two, three years out inflation really begins to take hold.”
More on Greenspan:
A Legacy of Debt and Delusion – In recent months, much has been written about the legacy of Federal Reserve Chairman Alan Greenspan, who, after eighteen years, will retire in January. Most of the legacy discussion has been based on the steady hand of the Fed Chairman – a steady hand that has resulted in an era of low reported inflation and mild recessions, while fostering sustained growth through what many have hailed as superb monetary policy.
Others don’t see it that way.
Some believe that the Greenspan legacy will be one of debt and delusion – debt of all kinds piled high, lingering far into the future, and delusion in reflecting back, at how we have all behaved during recent years.
Greenspan: Another crisis is inevitable – It’s not clear which is worse when it comes to former Fed chairman Alan Greenspan:
- That he was head of the central bank and left such a mess
That, in retirement, groups continue to invite him to speak
That the media covers these speeches so thoroughly
That there isn’t more outrage about items 1, 2, and 3 above