The Federal Reserve Bank didn’t contribute to the coming recession – and, besides, a recession might not be coming after all, Alan Greenspan says.
“The odds are we are going to be OK,” the retired Federal Reserve chairman said here before Thursday’s sharp stock market decline, during a discussion at the annual meeting of LIMRA International, Windsor, Conn.
Despite the implosion of subprime mortgages and the explosion of oil prices, the odds of a recession anytime soon “are less than 50-50,” Greenspan said.
While there is “no question” that the Fed was trying to keep rates low when U.S. home prices started to surge around 2005, high housing prices were seen in more than 30 countries where mortgage rates were in the single digits, Greenspan said.
“So you can’t argue American’s short-term interest rate caused the whole thing,” Greenspan said. What’s more, he said, the vast proportion of mortgages have been fixed rate.
“The rest of the world is doing well,” and it probably would be even stronger if it were not for the surge in oil prices, Greenspan said.