Despite a string of government economic reports indicating that the economy is not as weak as many had predicted earlier this year, former Federal Reserve Board Chairman Alan Greenspan said it is much too soon to say that the U.S. has dodged a recession.
"When we look back at this period, I still think that it will be seen as a recession," Greenspan told attendees at Pershing's annual Insite Conference in Hollywood, Fla., yesterday.
However, Greenspan noted that the probability of a severe recession has come down markedly. When asked what inning the credit crisis is in, he declined to answer but noted that "there have been 23-inning [baseball] games."
Greenspan added that food and energy prices are in a long-term uptrend and that inflation will probably continue to be a problem over the next few years. "Hopefully, recognition of the problem will help head it off," he said.
He added that he believed that fundamental supply and demand issues and not a weak dollar were driving higher commodity prices.
Asked about his role in the housing bubble, Greenspan said that the power of central banks has been exaggerated and that it continues to decline. He said prices of homes are largely the function of long-term interest rates. Two dozen other countries had home-price booms that all started early in the decade, he added. "In 2004 we started to raise [short-term] interest rates with the expectation that 10-year interest rates would rise," Greenspan said. They didn't rise, and Greenspan called it a conundrum. "There was very little we could do. We were all in the grip of a universal, global market" that could not be controlled, he said.