Greenspan says the the U.S. has slipped into “an awfully pale recession.” Come again? Perhaps more importantly, Greenspan suggests that the economy may “languish for the rest of the year.” Speaking in an interview with Bloomberg, Greenspan also raised concerns over soaring commodity prices and a weak dollar. Bloomberg:
While declining to comment on monetary policy, Greenspan said the economy is returning to a more inflation-prone period. Import prices are rising, as are wages overseas, adding to pressures already caused by soaring costs of food, energy and other commodities.
Greenspan, 82, portrayed the economy as being caught in a “tug-of-war” between cash-rich businesses on the one hand and money-losing financial institutions on the other. “This is a very unusual situation,” he said. “Neither side is obviously winning the battle.”
Home prices, according to Greenspan, are the root of the problem, and until they begin to stabilise, the credit crunch will continue to rear its ugly head:
Until there are stabilised prices of homes, and I think they have a good way to go down, you still have prospective losses” for financial companies and investors. “It’s too soon to tell” if the worst of the credit crunch is over, he added.
Home prices in 20 U.S. cities fell in February by the most on record. The Standard & Poor’s/Case-Shiller home price index dropped 12.7 per cent from the same month last year.