oops he did it again

Posted on May 11, 2007

0


Here we go again.

Former Federal Reserve chairman Alan Greenspan has gone and repeated it – resurrect the R-word, that is.

After spooking the markets in February with the view that the US economy could be in a recession at year end, he reiterated that the US has a one-third possibility of slipping into recession during a conference hosted by Merrill Lynch in Singapore.

Just watch the markets when they open in the morning.

The Dow Jones Industrial Average had already fallen in yesterday’s trading to its lowest in two months, losing 150 points in the wake of poor retail sales and a widening trade deficit.

So another round of Greenspan’s gloomy pronouncements is just what it needs.

Poor Bernanke. Upstaged yet again. And this, right after the Federal Reserve had elected to hold interest rates steady at 5.25 per cent earlier this week and said it was more concerned about inflation.

So expect jittery investors to second guess Bernanke again, no thanks to his predecessor.

Speaking via satellite from Washington D.C., Greenspan cited the slowdown in consumption and the weakening housing market as proof, while pointing out that the “mild recovery” experienced in the second quarter wasn’t strong.

While the estimated forecast for economic growth in the first quarter is 1.3 per cent – the weakest in four years – analysts were more pessimistic, predicting that it would likelier be at one per cent, Bloomberg reported.

On the bright side, Greenspan thinks Asia can weather the impact of a US economic slowdown, thanks to India and China’s continued growth.

In the name of free speech and in view of his book promotion, Greenspan should be allowed to say whatever he pleases.

But at the same time, he had been the Fed chairman for close to two decades and is still highly regarded for his expertise in economics, which makes it inevitable that what he says can and will move markets.

Therein lies the problem. Bernanke has only been in a job for a little over a year and is still trying to fill Greenspan’s considerably big shoes. A more gracious person would go quietly into the night and let Bernanke earn his stripes without interference.

Unless, of course, the two are really in a tag-team, playing good and bad cop, in a bid to cut interest rates, as postulated by conspiracy theorists.

Advertisements