Ryan Remiorz/The Canadian Press/AP
Former United States Federal Reserve Board chairman Alan Greenspan listens
to his introduction before speaking to a bank conference in Montreal Friday,
May 30,
2008. (AP)

Recession Looming, Says Former Fed Chief

June 24, 2008 05:31 PM
by Anne Szustek
Alan Greenspan said Tuesday that America “is on the brink” of a recession, with the chances of an economic slump greater than 50 percent.

30-Second Summary

On the eve of the Federal Reserve’s announcement on whether it is cutting interest rates, retired Federal Reserve Chairman Alan Greenspan said, “a rebound at this stage is not something I think is in the immediate outlook.”

Current Federal Reserve Chairman Ben Bernanke is not expected to make on Wednesday what would have been the eighth interest rate cut over the past nine months or so. But CNBC’s Steve Liesman foresees a bump in interest rates within the next year—up to as much of a benchmark rate of 3.25 percent from its current 2 percent.

Meanwhile, consumer inflation pushes on. Combined with sluggish retail sales numbers, employment and salaries, some economists are muttering “stagflation”—an economic pattern difficult to remedy, given the conflicting prescriptions necessary to rein in prices while allaying other indicators.

Greenspan is among those saying that high prices need some monetary intervention—argues Joseph Lazzaro of BloggingStocks: his reference “to a potentially highly unstable inflation environment as his signal to financial players that monetary policy has to tighten at some point to put a lid on U.S. inflation.”

24/7 Wall Street’s Douglas A. McIntyre quips that Greenspan’s concept of the economy is so far removed from reality, however, that “his family pins a note on his shirt so that the other patrons know where to send him when the day is over.”

Headline Link: ‘U.S. Economy on Brink of Recession, Greenspan Says’

Video: ‘Fed, Econ & You’

Background: The definition of a recession

Historical Context: Stagflation—1970s economic style

Opinion & Analysis: Piercing inflation

Reference: Guide to the U.S. Economy; economic cycle data


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