Greenspan: U.S. Recession Not Probable

Former U.S. Federal Reserve Chairman Alan Greenspan told a Tokyo seminar on Thursday that he does not think an economic slowdown in his country is “probable,” toning down his earlier warning over a recession later this year.

“It is possible we can get a U.S. recession toward the end of this year, but I don’t think it’s probable,” Dow Jones Newswires quoted Greenspan as saying in his speech at a Tokyo forum organized by international brokerage CLSA.

On Monday, Greenspan said a recession was possible, though it’s difficult to predict the timing, a comment blamed in part for the global market decline this week.

A plunge in Chinese share prices Tuesday and weaker-than-expected U.S. durable goods orders for January were also seen as contributing to the world share market slump.

Speaking via satellite to investors at CLSA’s Japan Forum, Greenspan on Thursday appeared to want to hedge his bets on his prediction of the U.S. economy.

“Things look reasonably good in the short run for the U.S. and the world,” he said. But “we can’t just assume that this extraordinary period of recovery can extend indefinitely.”

Greenspan also said Thursday that the U.S. has “gone through the major part of adjustment” in housing prices and “the worst is over,” though the housing market is expected to remain weak, Dow Jones reported, citing information provided by CLSA.

He said the weak U.S. housing market has had only limited impact on consumer spending because consumers have been encouraged by the fall in gasoline prices.

Greenspan reiterated that it’s in China’s interest to allow the yuan’s exchange rate to be set by the market. But he said a decision to allow the market to set the yuan’s exchange rate is up to China.

That, however, would do little to improve U.S. trade balance because a decrease in Chinese imports would likely be replaced by those from other developing nations.

Source: The Associated Press