Wednesday, April 09, 2008

Greenspan may have said we are in a recession

An article on Reuters entitled "Greenspan, on CNBC: U.S. in recession" indicates that former Federal Reserve chairman Alan Greenspan said that the U.S. economy is in a recession, but there was no clear quote:

Former Federal Reserve Chairman Alan Greenspan said on Tuesday the U.S. economy was in recession...

Greenspan went farther than the Fed has by saying outright that the economy is in a recession, although he said it is too soon to say how deep or prolonged the downturn will be.

"Consumers are beginning to shrink in, the automobile markets are beginning to contract, production is beginning to ease, and we are in the throes of recession," he said.

The U.S. economy will not stabilize until housing markets recover, Greenspan said.

I am not so sure that "in the throes of recession" necessarily means that the entire U.S. economy is in a full-blown recession (as opposed to various sectors contracting to various degrees), but I'll accept the characterization as "fact" until there is some clarification. He may simply have meant that we are seeing a number of effects that are typically seen in a recession.

The main reason I hedge is that only a couple of days ago (April 6th) a Reuters article entitled "More than 50 percent chance of U.S. recession: Greenspan" quoted Greenspan as saying that we were not yet in recession:

There is more than a 50 percent chance the United States could go into recession, former Federal Reserve chairman Alan Greenspan told El Pais newspaper in an interview published on Sunday.

However, the U.S. has not yet entered recessionary state marked by sharp falls in orders, strong rises in unemployment and intensive weakening of the economy, he said.

"We would have to see signs of this intensification: there are some, but not many yet," he said. "Therefore ... I would not describe the situation we are in as a recession, although the chances that we'll have one are more than 50 percent."

So, when Greenspan was clearly quoted a few days ago as saying "I would not describe the situation we are in as a recession", I accepted that as his position. My best guess is that Greenspan either mispoke on CNBC or was mininterpreted and that he used "throes" in the sense of symptoms that are painful.

I'll await some clarification from Mr. G.

Meanwhile, I will persist with my characterization that we are at the edge of a recession, that the data is not yet in the severe contraction state, and that I believe that there is a 75% chance we will have a recession, but there is still a 25% chance that we will avoid recession.

-- Jack Krupansky

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