At Least Alan Greenspan Is Getting Some Good Recovery
At least he admits that only the bankers are getting a piece of this good getting better mojo. As for the rest of us, we can keep waiting.
Greenspan was on Meet the Press this weekend explaining that the biggest fear is a continued drop in housing prices. Now I know what you're thinking: shouldn't falling prices be a good thing? Well yes, Virginia, they are a good thing except to a guy like Greenspan who is well-versed in what a good bubble can accomplish. We all know the Fed can't just create money out of nothing and drop it out of helicopters but let's just say theoretically the Fed desired to make the economic picture look nice. When consumers are buying, credit is flowing and jobs are plenty, the Fed looks like it's doing its job. So of course higher house prices are a good thing, it keeps the yoke strapped tight to the consumer's back; which as we all know is the only way the cycle can be perpetuated year after year without collapsing.
"Our problem, basically, is that we have a very distorted economy," he said, "in the sense that there has been a significant recovery in a limited area of the economy amongst high-income individuals who have just had $800 billion added to their 401(k)s and are spending it and are carrying what consumption there is."Tell that to nearly everyone who lives in San Francisco. I guarantee you bars would be full and retail stores stuffed if we didn't have to pay $1500 a month to rent half a closet in a Tenderloin warehouse.
Everybody else -- "small business, small banks, and a very significant amount of the labor force" -- is caught in "tragic unemployment" that is pulling down the country, Greenspan said.
Asked by program host David Gregory if the U.S. could enter a second recession if the housing crisis deepens, Greenspan answered: "It is possible, if home prices go down."