Word: greenspans
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...still tells a nice, uplifting economic story. Greenspan practically leaned back in his armchair and lit a pipe as he recounted, as if to the grandkids, the U.S. economy's bumpy journey from the "frenetic" tech investment boom of the late '90s to the "fierce and unrelenting" decline in same that, sharpened by Sept. 11, has landed us in our current predicament. Considering the height of our heights, this recession - if indeed 2002 is a recovery year - has been a "relatively mild downturn...
...Greenspan credited the piper's relatively modest demands this year to an economy fundamentally changed in the middle of the last decade to one with "an improved degree of resiliency, flexibility and adaptability" driven by information technology and unbound by globalization and deregulation. "To be sure, a great deal of real economic pain has been felt over the past year and a half," he said. But for the economy to have weathered the NASDAQ crash of 2000 and the terrorist attacks of Sept. 11 "as well as it has is truly impressive...
...course no grandfather's tale would be complete without some moralizing. Sept 11 "left marks on the economy that will not soon fade," and in an irrational-exuberance moment Greenspan reminded his audience that economic forecasting - and its kissin' cousin, investing - has been made even more difficult by the "major uncertainty that we all must deal with these days: The specter of further terrorist incidents on American soil. It simply is not possible to predict whether there will be any such incidents or to forecast their possible consequences for the economy...
...short term remains laced with dangers. Household spenders are vulnerable to the triple-threat of high unemployment, rising long-term interest rates and the negative wealth effect of what Greenspan euphemized as "equity deflation." (Interestingly, Greenspan lent no overt credence to the worries about consumer debt that have cropped up lately, though rising mortgage rates are certainly part of that.) Businesses, without consumer demand (or, for that matter, much in the way of profits) to inspire them, may be slow to begin the capital investments that will fuel the next expansion...
...Leaving the door ajar is one thing Greenspan has always known how to do, and anyone expecting a rate-policy telegraph Friday from the FOMC was deluding themselves. But whether it's the prospect of the end of his long tenure as Fed head - his term runs out in June 2004 - or just his place at the center of some truly historic economic times, Greenspan has become rather fond of telling the story of the last few years, and he tells it pretty lucidly for a man who spent the first ten years of his chairmanship elevating inscrutable "Fed-speak...