Daily Revolt

December 16, 2007

Greenspan: U.S. Moving Closer to Recession

I'm more worried about a depression:
Former Federal Reserve chairman Alan Greenspan said this morning that even though it seems more and more probable that the United States is headed into a recession, what is remarkable is that the likelihood of a recession is not already higher.

"The probabilities of a recession have moved up to close to 50 percent -- whether it's above or below is really extraordinarily difficult to tell. I think that's correct," he said in an exclusive "This Week" interview with George Stephanopoulos.

"The real story is, with the extraordinary credit problems we're confronting, why the probabilities are not 60 percent or 70 percent," he said.

Greenspan also noted that the economy is beginning to show warning signs of "stagflation" -- a possibility he alluded to in his latest book, "The Age of Turbulence" -- when slow growth, rising unemployment and inflation all strike at the same time.

"Because of the tremendous geopolitical shifts that occurred at the end of the Cold War, we've had a period of remarkable disinflation," he said. "That period is now coming to an end, and the evidence is clearly there in rising export prices coming out of China. It's showing up in a slowed rate of productivity growth in the United States and elsewhere, and we are beginning to get not 'stagflation,' but the early symptoms of it."

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