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Published: September 16 2007 19:40 | Last updated: September 17 2007 00:00
US house prices are likely to fall significantly from their present levels, Alan Greenspan has told the Financial Times, admitting that there was a bubble in the US housing market.
In an interview ahead of the release on Monday of his widely-anticipated memoirs, the former chairman of the Federal Reserve said the decline in house prices “is going to be larger than most people expect”.
But Mr Greenspan said that his successors at the Fed – who meet on Tuesday to set interest rates – would have to be careful not to ease rates too aggressively, because the risk of an “inflationary resurgence” was greater now than when he was Fed chief.
Mr Greenspan said he would expect “as a minimum, large single-digit” percentage declines in US house prices from peak to trough and added that he would not be surprised if the fall was “in double digits”.
Mr Greenspan was a fine Fed Chairman, but now he needs to shut his mouth. Our economy rises and falls with every word the man utters and he should know that. His publicized opinions on economic matters at this point is a bit irresponsible on his part IMO.
With regards to the Iraq war, I'd say he's taking an AWFUL lot of credit that his word carried the weight and the fate of the nation.... Sure Al, we went to war because of what you said. I think we need a big pin to pop his over-inflated head here...
Edit: (Gotta say I like what he said about housing, but again, his words are a bit of a self-fulfilling prophecy at this point. IE. Our economy in some respects will do what he thinks it will because he SAID it will and people believe his word is 100% truth.... It's dangerous for him to speak on such matters IMO..)
Remember, you are reading the words of the guy who brought about the 1999 stock market bubble and opened the discount window in fear of a Year 2000 technological meltdown. Greenspan screwed up royally more than once during his tenure. He is a political sycophant who used to be a devotee of Ayn Rand. So he's no real intellect.
Bubbles, bubbles, bubbles. Markets are like the people on the bus...they go up and down. You'd think people would be used to that by now. The quality of economic discourse would improve substantially if everyone were to agree to a 2-year moratorium on the use of the word 'bubble'...
damn, I hate to say this.. but I agree.. you always have to look at the long term and that's always been positive, no matter what. and hopefully it always stays that way
War for Oil: I am surprised that Mr. Greenspan (a Republican) took such a long time to admit that the war was all about oil. It has always been about oil, Mr. Greenspan. Our economy is heavily dependent on foreign oil and I think most of us find it convenient to ignore the genocide of a foreign population brought about by our leaders as long as we can fill our gas tanks at a discount and drive the six kids to soccer practise. What is really different this time is that the war hasn't really paid off for the average American, the only people who have financially benefited from this war are oil and defense companies, so, we are huffing and puffing about it. If oil gets down to $2 a gallon and we know we are killing innocent Iraqi civilians for that price, will the average American give a rat's a**? That's who we are.
Housing crash: I find it rather amusing someone suggested that Greenspan shut up because his words influence the economy. Have you noticed the "ex" in front of "Fed Chairman"? Even when he was chairman, the market did not react immediately to his statements. In case you don't know, there was a large delay between his famous "irrational exuberance" comment and the crash. Now, will the property prices come down more? It depends. But like everything else, you need buyers. If you really need people with good credit that can buy homes without creative mortgages in the United States, you need to make an international call to China. We are big spenders, who don't save.That was fine, it's okay to have fun. But now, we are big spenders, who don't save and don't make anything but war. Greenspan or no Greenspan, that is really bad for the checkbook, period.
Greenspan is a master of doublespeak. He helped create huge asset bubbles in technology and housing- but merely excuses these phenomenon as a consequence as 'The end of the cold war'. Now the 'dynamics have shifted' he claims, and we do have in fact a housing bubble, and that inflation will become a problem again in the near future, making the Federal reserves ability to lower rates problematic.
If so, and Bernanke lower rates today as expected, the price of commodities will soar, today gold is up over $4.00- approaching $720 an ounce. The dollar drops, and the cost of goods made overseas rises along with oil. Increasing inflation, just as Greenspan predicts. Not a very pretty picture.
Housing crash: I find it rather amusing someone suggested that Greenspan shut up because his words influence the economy. Have you noticed the "ex" in front of "Fed Chairman"? Even when he was chairman, the market did not react immediately to his statements. .
Nah, spoken like someone that wasn't invested in the market a year or so ago..... Greenspan has a bad habit of offering his opinions on the market and what should be done and has influenced the stock market INSTANTANEOUSLY with some of his irresponsible and off-the-cuff remarks and has undermined Bernanke on more than one occasion. I did notice the "ex" in front of Fed Chairman but from what I've seen Greenspan has yet to notice it.....
I'll tell you I didn't find it amusing at all when stocks plummeted based on "what Greenspan said"...
Nah, spoken like someone that wasn't invested in the market a year or so ago..... Greenspan has a bad habit of offering his opinions on the market and what should be done and has influenced the stock market INSTANTANEOUSLY with some of his irresponsible and off-the-cuff remarks and has undermined Bernanke on more than one occasion. I did notice the "ex" in front of Fed Chairman but from what I've seen Greenspan has yet to notice it.....
I'll tell you I didn't find it amusing at all when stocks plummeted based on "what Greenspan said"...
Good point! BTW, I have foreign investments...doing quite well!
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