GO
Loading...

Greenspan Sparks More Debate With Latest Recession Prediction

Alan Greenspan is at it again.

The former Federal Reserve chairman added fresh fuel to the recession debate Tuesday, saying in an interview that that there's a "one in three" chance of a downturn in the U.S. economy this year. That followed comments a week earlier that a recession was "possible" by the end of the year.

"We are in the sixth year of a recovery--imbalances can emerge as a result," Greenspan told Bloomberg on Tuesday. "Ten-year recoveries have been part of a much broader global phenomenon. The historically normal business cycle is much shorter."

Greenspan's outlook contrasts with that of his successor, Ben Bernanke, who told Congress last week that the economy may strengthen this year. While Greenspan's initial comments about a recession helped trigger last Tuesday's stock market selloff, Bernanke's remarks the following day helped steady the market.

Greenspan comments have sparked debate not only about the possibility of a recession but whether he should be speaking publicly at all about the economy. Although he is now retired, he still has considerable influence over the markets, as last week's selloff showed.

"I almost wish they'd take him out for a round of golf," said Joseph Balestrino, of Federated Investors. "At least it's a very time-consuming activity that he would never master."

Most economists, in fact, are not as pessimistic as the former Fed chairman. According to CNBC's Steve Liesman, a survey conducted in January of 50 economists had put the odds of a recession at 25%, not 33% as Greenspan predicted.

Others believe investors should pay more attention to Bernanke than Greenspan anyway.

"(Bernanke's) actually got his finger on the button now, not Alan Greenspan," Lehman Brothers Senior Economist Drew Matus said on CNBC's "Squawk Box." "So if you want to figure out who to listen to, I would listen to all those Fed officials who keep telling us that they are worried about inflation."

Matus noted that the latest increase in unit labor costs, which was reported by the Labor Department on Tuesday morning, is likely to keep Fed policymakers worried more about inflation than a recession.

Joe Ranieri, managing director at Canaccord Adams, told CNBC that he doesn't think Greenspan's comments are "earthshattering."

"I think it is just a comment thrown out there by Mr. Greenspan," Ranieri said. "He now has a 33% chance of being correct somewhere down the line."

Visitors to CNBC.com had their own opinions about Greenspan's comments.

"Does he still want the job?," asked Jodi G., from Michigan.

But other took the tact that more information is better than less.

"Mr. Greenspan is a very intelligent economist, but not flawless," said Robert H., of New Hampshire. "His opinion is just one of many. How we react to it is our choice."

Contact U.S. News

  • CNBC NEWSLETTERS

    Get the best of CNBC in your inbox

    › Learn More

Don't Miss

U.S. Video