Greenspan Says Odds of Recession in U.S. Are `Clearly Rising'

Vivien Lou Chen
Bloomberg
Friday December 14, 2007

Former Federal Reserve Chairman Alan Greenspan said the risk of a U.S. recession is increasing and that economic growth is ``getting close to stall speed.''

While it's too soon to say a recession is coming, ``the odds are clearly rising,'' he said in an interview with National Public Radio yesterday. Excerpts of the conversation were published on the network's Web site.

The U.S. economic expansion, which began in 2001, is cooling after a third-quarter surge as the housing slump enters its third year and consumer spending slows. Martin Feldstein, head of the National Bureau of Economic Research, which is responsible for dating U.S. economic cycles, and former Treasury Secretary Lawrence Summers are among those also raising the prospect of a downturn.

Greenspan, 81, left the Fed in January last year after almost two decades at the helm of the world's most powerful central bank. He has returned to his role as a private sector economic forecaster, speaking at conferences and to groups of bankers and investors. On Nov. 7, he told a conference in Sao Paolo that the chances of a recession were ``less than 50-50.''

Predictions that the six-year expansion is coming to an end have been countered by Allan Meltzer, professor of political economy at Carnegie Mellon University in Pittsburgh. Meltzer's case was strengthened yesterday by a Commerce Department report showing retail sales rose 1.2 percent in November, twice as much as economists anticipated.

Meltzer's Outlook

``We should still see reasonable sales growth and no recession,'' Meltzer, also a Fed historian, said in a telephone interview after the report. ``It's quite reasonable to expect high energy prices will slow business investment and, eventually, consumer spending, but people are working, the unemployment rate is low and Christmas is Christmas.''

Greenspan defended his record as a policy maker in a Wall Street Journal editorial on Dec. 12, saying that lowering the Fed's target interest rate to 1 percent in 2003 didn't have a major impact on demand for homes with adjustable-rate mortgages. Meltzer said later the same day that the former chairman ``lets himself off much too easy.''

Full article here.