Candid Comments from the Former Fed Chief!
In a remarkable interview that occurred on CNBC early on Friday 3/4; Alan Greenspan made a number of comments that I doubt will ever be published (except by me) but here is what he said according to my notes.
“QE2 may have harmed the US economy, but we won’t know for a while just how much damage has been done!” Bernanke disagrees.
“The Todd-Frank Bill is very problematic and needs major changes. They need to be done ASAP. The US Regulatory environment is hurting the US economic recovery and that includes the Financial Reform Law (Todd-Frank).”
“Distressed home sales are dragging the economy down. When the subprime loans go underwater they default, leading to declines in prices brought about by foreclosures and short sales. Those price declines simply drag even more homes into default.” He also said, “Conventional loans rarely default when they go underwater.”
“Food price inflation will continue because as the emerging markets change their diets from grains to meat; supply and demand causes prices to rise. There is a finite amount of land on earth to grow grains to feed animals.”
A number of comments he made with regard to oil prices:
1. “Brent sea crude is the benchmark for oil prices.”
2. “$100 plus per barrel oil might derail the economic recovery.”
He also commented that the price of gold had to do with the number of corporations and individuals who are “concerned that the economy may not recover from the recession and are buying gold as a hedge.”
He said that, “Problems in Europe with the Euro could also derail a US economic recovery.”
Unemployment: Greenspan said that the “reason we are having a continued high unemployment rate has to do with the fact that before the recession businesses simply had to spend money to increase market share to improve earnings. After the recession companies began investing in ways to REDUCE COSTS. With productivity improvements they don’t have to have as many employees to do the same amount of work.”
Editor’s notes: Frankly this is the first time I have ever heard Greenspan this candid about much of anything. I was particularly stunned by his comments that seemed to me to be VERY NEGATIVE about the prospects of an economic recovery anytime soon.
“QE2 may have harmed the US economy, but we won’t know for a while just how much damage has been done!” Bernanke disagrees.
“The Todd-Frank Bill is very problematic and needs major changes. They need to be done ASAP. The US Regulatory environment is hurting the US economic recovery and that includes the Financial Reform Law (Todd-Frank).”
“Distressed home sales are dragging the economy down. When the subprime loans go underwater they default, leading to declines in prices brought about by foreclosures and short sales. Those price declines simply drag even more homes into default.” He also said, “Conventional loans rarely default when they go underwater.”
“Food price inflation will continue because as the emerging markets change their diets from grains to meat; supply and demand causes prices to rise. There is a finite amount of land on earth to grow grains to feed animals.”
A number of comments he made with regard to oil prices:
1. “Brent sea crude is the benchmark for oil prices.”
2. “$100 plus per barrel oil might derail the economic recovery.”
He also commented that the price of gold had to do with the number of corporations and individuals who are “concerned that the economy may not recover from the recession and are buying gold as a hedge.”
He said that, “Problems in Europe with the Euro could also derail a US economic recovery.”
Unemployment: Greenspan said that the “reason we are having a continued high unemployment rate has to do with the fact that before the recession businesses simply had to spend money to increase market share to improve earnings. After the recession companies began investing in ways to REDUCE COSTS. With productivity improvements they don’t have to have as many employees to do the same amount of work.”
Editor’s notes: Frankly this is the first time I have ever heard Greenspan this candid about much of anything. I was particularly stunned by his comments that seemed to me to be VERY NEGATIVE about the prospects of an economic recovery anytime soon.
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