Greenspan: Recession could be near

I'm sure Bernake appreciates his assessment of the economy. Can you say "butt out?"

Gee,I can't believe we would be coming into a recession period since W. gave those tax cuts to the rich people,investors and CEO's during the same time that he is burning up BILLIONS of U.S. $$$ on his phony balony Iraq war???

What gives ??

What gives ?? Duh...

The economy is cyclical, that's what gives. Recessions happen. We're due.

"When you get this far away from a recession, invariably forces build up for the next recessions, and indeed we are beginning to see that sign," Greenspan said.

Leo-

Does GWB get credit for the economy when it's good?

It's funny how everything becomes "cyclical" when a republican is in office, yet when the same cycles apply in a democratic administration, we hear words like "malaise."

I think Mr. Greenspan is a brilliant man, but he should let Mr. Bernake do his job without adding undue rumor and worry about the economy.

Yes, economy is cyclical by nature, but historically cycles have never been this short. We are barely out of the last recession and are expecting another one already?

Tom,

Both sides try to blame the other when a recession happens, you're right, but the fact is that recessions are cyclical.

Tony asks, "Does GWB get credit for the economy when it's good?"

No. Not from me.

No, W. should not get credit for a good economy. His economy is bought with trillon dollar deficits, tax cuts and coporate give-aways. I'm all for lower taxes, but you must realize the downside. A quicker up and a faster, harder down in the business cycle. Again W. took the cheap, fast way and leaves a mess.

Hey Greenspan...STFU!

Interestingly enough Greenspan doesn't mention a thing about national mortgage debt increasing from $5 to $9 trillion in just 6 years, quite possibly (probably?) fueled by a booming U.S. housing market as a result of creative financing (neg. amort., interest only, etc.) and housing speculators.

With housing affordability at a low, foreclosures on the rise ($1.5 trillion in adjustable rate mortgages will reset in 07), 5 years of unsustainable double-digit appreciation, 1/3 of all new jobs in the last 6 years in the housing sector...what's next?

I think the outcome of the housing market over the next few years (not months) will play a big role in the U.S. economy. And as far as the housing market stabilizing, a few months of of slightly good news is hardly stabilized.

Interestingly enough Greenspan doesn't mention a thing about national mortgage debt increasing from $5 to $9 trillion in just 6 years, quite possibly (probably?) fueled by a booming U.S. housing market as a result of creative financing (neg. amort., interest only, etc.) and housing speculators.

With housing affordability at a low, foreclosures on the rise ($1.5 trillion in adjustable rate mortgages will reset in 07), 5 years of unsustainable double-digit appreciation, 1/3 of all new jobs in the last 6 years in the housing sector...what's next?

I think the outcome of the housing market over the next few years (not months) will play a big role in the U.S. economy. And as far as the housing market stabilizing, a few months of of slightly good news is hardly stabilized.

i just found out that ants have eaten the liner of my pool. George Bush MUST be responsible for that too.

I'm sure the Republicans will blame Clinton faster then Bush for the oncoming recession.

Greenspan is a Brilliant Man it is true, but Dear Lord can't he keep his BIG MOUTH SHUT !!!!!

look how the market is droping just on his opinion.....

* sigh *

Before all the naysayers get carried away and head for the hills b/c US economic growth under GWB's watch is a fraud unmasked by former Chmn. Greenspan, please note what he actually said:

"While, yes, it is possible we can get a recession in the latter months of 2007, most forecasters are not making that judgment and indeed are projecting forward into 2008 ... with some slowdown."

That's quoted from an AP story.

No way! The probability of a recession is not zero after almost 5 years stronger-than-usual growth! Newsflash -- the probability of reecession is almost always present!

AG also said that declines in the price of housing have failed to dent economic growth, that economic growth in 4Q06 was much stronger than usual or expected, and that it's normal to see stock earnings and corporate profits flatten out late in expansions as workers make more in wages.

Hate the war in Iraq if you like. I do.

Hate Federal budget deficits. I do.

But let's keep our eye on the ball, folks. The economy's not going over a cliff as the GWB-haters are rooting for.

If it's nice, can we have recession outside? - GWB

Leo, it DOES seem kind of soon for an actual recession in a natural cycle. Given that there was a major downturn in 2001 that took a good couple years to start correcting itself significantly, we should be riding the upswing of a boom for another 2-4 years if the "law of cycles" (I just made that term up) were in play.

I'd buy a downward "blip" (that one's NOT my term) in a generally-rising economic cycle, where we lose maybe a half-point of growth or so, for a quarter or two (which nudges the minimum of the classic definition of recession). If we're talking a major movement lasting a significant amount of time, I'm kind of doubtful as to its being a natural part of the ongoing economic cycle. SOMETHING else would have to be going on.

Was there any word in the report as to how severe a depression Greenspan predicted? Does anybody know?

Greenspan has market influence. His "forecast" obviously can cause his predictions to come true. What if he had made the opposite prediction?

"...we are beginning to se that sign"

Little known fact: Greenspan occasionally slips some Spanish into his speeches. Either that, or the Swamp doesn't copy-edit very well.

recession happens there's no point in trying to predict every single thing that will happen anything could happen at anytime! let Bernake do his job and butt out greenspan.

greensperm is a guy who although he has millions and doesn't need the money, continues to feed his ego and undermine the federal reserve.

I am highly worried that a retired Fed chief that does not have the current information that the sitting Fed chief is privy to, can shake the market as he did. He should not speak for Bernacke, I think he had options in the market that were due to pay out today or tomorrow. It's as if Pres Clinton, can alter current legislation simply because he can, even if he is not the sitting Pres. I'm not conservative, but Greenspan's move frighten me.

Solution;

Legalize cocaine. Send a huge free supply to all the big Wall St. brokerage houses. Let the numbers go up.

We can all retire wealthy next week.

Why is Greenspan still gaslighting our economic lives, and why are investors still listening to him?

You're all wrong. It's not George's fault, it's all caused by global warming!

"Leo, it DOES seem kind of soon for an actual recession in a natural cycle. Given that there was a major downturn in 2001 that took a good couple years to start correcting ...
Was there any word in the report as to how severe a depression Greenspan predicted? Does anybody know?"
Posted by: John | Feb 27, 2007 2:48:58 PM

John,

I wouldn't know, really. I'm not an economist, but the cyclical nature of this is common knowledge.

It is also fairly common knowlege that presidents and policies might NUDGE the cycle one way or another, but the cycle is always there. Recessions happen.

BTW, I don't know if you were being intentionally cheeky, but greenspan did not use the word "depression".

Will these remarks be posted? a lot of my stuff has just been disappearing.

My original post appears to have been eaten by the system... shame

Derek,

"it's normal to see stock earnings and corporate profits flatten out late in expansions as workers make more in wages."

This is the essence of the problem. There has been no increase in wages, in fact a decrease in real wages, as the economy and stock market have swelled. On top of that, corporate profits have continued to go through the roof. This disconnect is what I fear the most with this economy.

With the unraveling of the housing boom, and the subsequent mass defaulting on the type of exotic mortgages that have fluorished during this period of growth (does anyone remember "irrational exuberance?"), coupled with the explosion in deficit and debt that will need to be paid down on the eve of the Baby Boom retirement, I believe that this economy is more smoke and mirrors than people acknowledge.

George W Bush and his voodoo economics have destroyed the progressive nature of this economy and have essentially handed the keys to the store to the aristocrats. Laissez-faire, business watching business regulations coupled with unreasonably favorable treatment of capitol over labor has produced exactly what one should expect: massive growth at the top of the economic scale and very little residual effect for those who are in the middle or at the bottom.

This is not trickle down economics as previously described, this is TRICKLE UP economics, where the fruits of labor go right into the hands of the owners of capitol, while the workers receive stagnant wages and reduced benefits.

In the 1980's, supply-side economics busted huge holes in the budget as revenues were not able to come close to matching expenditures (tax cuts for the rich pay for themselves??) and the debt ballooned. Bush Sr. raised taxes and Bill Clinton followed with his enormous progressive tax increase of 1993. What followed was the largest and broadest economic growth in the nation's history. That came to an end in late 2000, and Bush Jr. inherited a mild recession at the start of his term. He has since taken the large surpluses to large deficits by handing enormous tax cuts to the wealthiest Americans, increased the national debt 3 fold, borrowed from the future of our children to pay for the extravagancies of today to the effect of producing an economy that is great for the haves and lousy for the have nots. Big surprise at the results there.

Here is a chart of the national debt since World War II. Note that the overwhelming majority of debt has been signed into law by Republicans. Chart: http://zfacts.com/p/318.html

I'd like to point out what people were saying back in the 1990's when Clinton and Gore fought courageously for their tax policies and suffered at the polls for it in 1994. People inclined to believe in the GOP fantasy of trickle down economics were crying that the sky was going to fall, that the economy would be destroyed and less revenue would be brought in. Here is the Heritage Foundation's 15 reasons why the 1993 Tax Bill would DESTROY the economy. http://www.heritage.org/Research/Budget/bu201.cfm

Of course, they were completely wrong, as were all the naysayers. Supply-side apologists will attempt to spin away the economic success of the 90's by playing up the role of the computer (the growth provided then from the high tech industry is on par with that produced by the construction industry between 2000-2006) or credit Gingrich's Congress with forcing reduced spending. This is undeniably part of the picture, but if what we are being told by conservatives is true, high taxes on the investment class should have nonetheless resulted in calamity or at best very mild growth.

This is the conclusion at the end of the aforementioned Heritage Foundation article:

"The result, unfortunately, is all but certain: Higher taxes will lead to higher spending, larger deficits, more unemployment, and lower economic growth." Daniel J. Mitchell McKenna Senior Fellow in Political Economy

Okay so let me see, that is four predictions, of which how many came true? Oh right, NONE. In fact the opposite occurred as spending was held in check (again I give some credit to the GOP Congress), unemployment bottomed out, deficits were rapidly turned to surplus, and of course the economic growth was unrivaled.

Progressive taxation is not only the fairest system available, it is also the most economically powerful. The 1990's proved this and the subsequent Bush II years have put an exclamation point on it. If, instead of showering the wealthiest of Americans with even greater largess, Bush had focused his trillion dollar tax cuts on the middle class, this economy would be far stronger and might be reminiscent of the boom years of the 90's. Instead, we are watching the housing market collapse and talking about recession already.

Well, although Greenspan may have had an influence on what happened today, to look upon his comments as being a sufficient cause or as if he is to thereby responsible is not an accurate view. There were bear oriented mutual funds piling up short positions, not least of which on ETFs, following our market's initial reaction to China's market and their more significant downturn, and the durable goods report showed a decrease of 7.8% in sales, which seems to be, in part, a reflection of the previous downturn in the housing market finally catching up. It's always easier to retrospect these things - but if I had had the foreknowledge to predict this little storm, I would have been rich from loading up on put options on emerging market ETFs.

Leo T,
My 'welcome back to the machine' posting, with my response to you finally got posted to Sunrise.

The margins are blown, but I think you will get the joke.

It took a long time to get it posted.

BTW, ther are lots of back channel conversations regarding lost or missing postings that are not offensive.

The Swamp needs to listen up on this.

Their life blood is postings from us. The Swamp reporters sub a piece, we comment. They need to post our responses, and ASAP.

Too much delay, too may lost postings = frustration and non-participation.

Why create a long posting if it won't get in for no apparent reason? I'm not talking about hard cussin. It should be rejected.

But tart, tough postings are what this 'Swamp' is all about.

C Morris -- WAIT -- I thought it was only John D whose posts were censored (cue: GASP -- feign shock and reach for fainting couch) by the fatuous liberal Tribune because they feared his reliance on hard facts and cold logic would upset their Anti-American agenda.

Actually, I've had a bunch of mine get trashed too, but I just figured I'd gone off the edge again. Or some that would take two or three days to post, so that by the time they landed the original string was ancient history.

Nice to hear from ya, and I hope the Trib listens.

Leo, I agree with you on cycles in general, but just thought the current one seemed a bit soon for a downturn, since my recollection is that cycles usuaully go for at least 3-5 years or more before a SIGNIFICANT change in direction. If the market is correcting itself over a short term it would all make sense. Thought you might have more info than I did is all. And, no, not being cheeky about the "depression." I actually apologize for having used that term (should've paid more attention to my phraseology, I guess), which was NOT my intent. It's always possible we could be hit by a depression, of course, but nothing I'm looking at says that and I didn't mean to say I thought that's what was happening. Sorry.

J

John,
Actually, Economics isn't my thing at all. I really don't have any more insight than anybody else. Just seemed to me like we might be due, but I could be wrong.

To all,
As for the posting: It's always been kind of slow, but for the last few days they've just been disappearing... I thought maybe Uncle Trib was mad at me, but then I noticed that traffic has been way down overall.

Some kind of glitch, or are they trying to tell us something? Hmmm...

John,

Thanks for the shout out.

I'm much calmer today.

Looking forward to some heated, tart, smart debates.

Catching up is hard, though.

Isn't Greenspan the same guy that gaslighted the economy in the
late Nineties??

International Institute of Management (IIM) released a new report warning about the U.S. economic risks. The report:
1. Uncovers the forces behind Feb 27th stock market meltdown and the Chinese reaction to the outlook of U.S. Economy.
2. Forecasts the future behavior of U.S. and global markets.

Med Yones, the author of the white paper, warns against costly policy mistakes and provides a detailed analysis of the economic, social and geopolitical risks facing the United States

The complete text of the report is available at:

http://www.iim-edu.org/u.s.economyrisks/

Bryan,

Sorry I took so long to respond to your post, but I just woke up from reading it.

Let's simplify:

If income taxes are raised across the board in a proportion to how people pay them (for example; a middle class family currently pays $5,000 in income taxes and a rich family pays $50,000. Income taxes for each family increase by 10% - middle class pays $500 more, rich family pays $5,000) and all other things are equal within the economy. Will the economy benefit or suffer? Please explain.

People who are saying that it is "too soon" for a recession have not looked past the two prior business cycles. Historically, economic expansions have lasted more like 3-5 years. Look at the expansion periods since world war II:

Nov '45 - Nov '48 3 years
Oct '49 - Jul '53 3 years, 9 months
May '54 - Aug '57 3 years, 3 months
Apr '58 - Apr '60 2 years
Feb '61 - Dec '69 8 years, 10 months
Nov '70 - Nov '73 3 years
Mar '75 - Jan '80 4 years, 10 months
Jul '80 - Jul '81 1 year
Nov '82 - Jul '90 7 years, 8 months
Mar '91 - Mar '01 10 years

Prior to the last two economic booms, there was only one post world war II that lasted more than 5 years, and more than half of that expansion occured with the US at war on a much larger scale than the current war in Iraq. If a recession started late in '07, that would put this expansion at 6 years total - still considerably longer than the average expasion. Even if we exclude the weak recovery of '02 and 1st half of '03 and start when the economy spurted in the 3rd quarter of '03, this boom will be 4 years old by the summer.

I'm not making a prediction one way or the other, just pointing out this expansion is already longer than average.

Bryan,

I enjoyed your claim that real wages are falling supported by charts of growth in the Federal Debt. Here's the most recent Emplyment Cost Index report from the Bureau of Labor Statistics:

http://www.bls.gov/news.release/pdf/eci.pdf

You will note that the third graph demonstrates that real wage growth is again positive for the first time since 2003. Not to mention that employment costs (wages + benefits) paid to workers have grown even more quickly, directly affecting profit growth.

No doubt that wage growth has been weak and that owners of capital have done well in a period where corporate profits rose in part because real wage growth was negative. But profits also grew because unit labor costs declined driven by sustained productivity growth, and increased labor productivity is the gift that keeps on giving (allowing the economy to grow without meaningful inflation).

Let's leave a discussion of whether federal deficits/debt have any relationship to the level of interest rates or economic growth for another time. Your argument that the GWB economy is a house of cards would have more merit if the evidence you cite was actually correct. Where is the "unraveling of the housing boom"? The "subsequent mass defaulting on the type of exotic mortgages that have fluorished [sic] during this period of growth"?

I'm not fond of the accumulation of federal debt but if it is a serious threat to the economy, why are long-term interest rates LOWER than cash yields? The federal debt is growing at 5% real over the past four years; hardly an "explosion." And the deficit is actually SHRINKING according to the Congressional Budget Office Monthly Budget Review:

http://www.cbo.gov/showdoc.cfm?index=7782&sequence=0

So I guess I agree with the former Fed Chairman and most professional economic forecasters that the US economy is not a house of cards.

Today’s 250 pt market meltdown is further proof of a housing-driven recession. More details on my blog at http://infohype.blogspot.com

The housing bubble is staring in the face of Bernanke. The housing-loan crisis is a child of the globalisation policy. Because globalisation is simply a phase of the imperialist era, when finance capital itself has become a commodity in derivative instruments. Please read Monoje W John's research work in this area (manoje.white@gmail.com).

http://infohype.blogspot.com

This blog is extremely informative. Please visit. Also write to manoj_freeman@yahoo.com for latest info on global financial market.

Aside from Greenspan's comments about the impending recession, I think the biggest detriment to average, work a day investors is the bombardment of contradictory information we receive every day on CNBC. Whether it's Morning Call, Sqwak Box, Closing Bell, Cramer, Kudlow, it's always a confrontational exchange between a Bull and a Bear. It's a wonder anyone makes any money listening to these guys.