Stock Gains Aren't Just 'Paper Profits': Greenspan

Alan Greenspan
Lauren Victoria Burke
Alan Greenspan

The stock market rally over the past few days has been encouraging and represent real profits, former Federal Reserve chairman Alan Greenspan told CNBC Thursday.

“A lot of people think of stock-market gains as paper profits. I think that’s the wrong slant,” said Greenspan.

Greenspan was interviewed live while attending the Aspen Institute Ideas Festival 2010in Colorado, which is an event that draws leaders in the fields of business, science, the arts and politics. It concludes on Sunday.

“Stock prices tend to move with the economy, with some lead,” he added.

In a CNBC interview earlier in the week, Greenspan said stock market declines are "typical" of the recovery process.

In Thursday's interview, the former Fed chairman said that between March of 2009 and 2010, 401 (k) accounts had increased by $800 billion. “That’s a huge amount,” he added.

Greenspan also said:

  • Commercial banks and nonfinancial corporations are holding on to some $3 trillion in cash because “they’re scared.” And banks aren’t lending because “they are afraid they won’t get their money back.”
  • China is buying foreign currency, including the US dollar, because their leaders don’t acknowledge that their currency is undervalued.
  • Fannie Mae and Freddie Mac need to be privatized, or to continue as a public entities with stringent requirements.
  • Slideshow: Biggest Holders of US Debt
  • Government Debt Issuers in Trouble