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I’ll say this for Alan Greenspan: he remains a master of obfuscation even in his retirement. His style mixes a combination of spin-doctoring, legalese, and Ayn Randian-style prose that makes the waters of the Gulf of Mexico look crystal clear in comparison.
In an interview on “Meet the Press” this past Sunday, he offered up a quote that feels like it was crafted by Winston Smith at the Ministry of Truth. When asked about the current state of the economy he offered up this tidbit:
“We’re in a pause in a recovery, a modest recovery, but a pause in the modest recovery feels like a quasi-recession”.
As to whether the economy will get worse before it gets better:
“Maybe, but not necessarily”.
With regard to housing and the possibility of a double dip, Greenspan offered this piece of spun gold:
“If home prices stay stable, then I think we will skirt the worst of the housing problem*. But right under this current price level, mainly 5, 7, or 8 percent below, is a very large block of mortgages, which are under water, so to speak, or could be under water. And that would induce a major increase in foreclosures, foreclosures would feed on the weakness in prices, and it would create a problem”.
*I find it difficult to believe that the worst of the housing problem has yet to occur. Sure, it theoretically could get worse, but what we have endured is already quite bad.
These statements skirt the obvious. The recovery most certainly appears to be stalled, and things may be getting worse. Growth is slowing and consumer confidence is dipping. We have made little progress on unemployment, and the housing sector appears to be backsliding despite relatively affordable housing and all time low mortgage rates. None of this is news, and I do not think it takes an economic seer to read the tea leaves.
At the end of the day, Alan Greenspan’s monetary policies at the Federal Reserve are one of the big reasons that we are in the economic mess we are in today. He does not bear sole culpability, by any means, but his policies helped to set the stage for our current troubles.
For a far more eloquent take-down of Greenspan and his policies, please check out this post by Barry Ritholtz on The Big Lead this morning.
What do you think? Let me know in the comments section below.
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