Ex-Fed Reserve Chair Greenspan Warns Of Recession
Alan Greenspan former Chairman of the Federal Reserve says that the U.S. is teeting on the edge of a recession. He says that while oil prices aren’t the main cause, the fact that they haven’t caused one is clearly a sign of how strong are economy is at its base. He cites the housing crisis as the reason for the coming recession, and specifically its instability of the housing market. Greenspan may be giving the economy more credit than it deserves, as many people aren’t finding it do be doing anything worth while, then again it could be worse.
Former U.S. Federal Reserve Chairman Alan Greenspan on Thursday said the U.S. economy is “clearly on the edge” of a recession.
Greenspan said the economy will continue to erode until there is a stabilization of U.S. housing prices.
“We have a long way to go” before housing prices hit a bottom, Greenspan told energy executives at the CERA conference.
High oil prices are dragging on the economy, but the fact that they haven’t done more damage shows its resiliency.
“It’s a burden now,” Greenspan said. He added that it’s “quite remarkable” that the U.S. economy is “able to do reasonably well” with oil prices near historic highs.
Crude oil futures hit above $95 a barrel on Thursday and went above $100 in early January.
Greenspan again — as he had last month — said that the likelihood of the U.S. economy going into recession was “50 percent or better.”
He said the U.S. economy was growing at “stall speed.”
“Stagflation is too strong a term for what we are on the edge of,” Greenspan said.The subprime mortgage crisis would already have put the United States into recession if U.S. businesses weren’t healthy in part as the result of years of low interest rates, Greenspan said.
“If businesses weren’t in extraordinarily good shape, I have no doubt we wouldn’t be asking if we’re in a recession, but how long and how deep,” Greenspan said.
“Obviously, they (businesses) are not pushed for credit,” said Greenspan.
Banks have cut back lending and will continue tight controls on borrowing until housing prices backed by subprime mortgages stabilize, said Greenspan.
Greenspan made his comments in response to questions by Daniel Yergin, chairman of CERA.
Greenspan said he would like to see additional use of electric cars.
Nuclear power makes the “most sense” to increase U.S. power generation when all trade-offs are weighed, he said. “We have to use nuclear,” Greenspan said.
He said more discussion is needed before any “cap” is created as part of a U.S. cap-and-trade carbon program.
A carbon cap would likely lead to lower economic activity and higher unemployment if one were set before emissions-cutting technology is widespread, Greenspan said.
Greenspan said he doubted that technological advances will solve the problem of growing carbon dioxide emissions.
“If you don’t have a significant amount to trade, a lot of people won’t be able to trade and won’t have the energy they need,” Greenspan said.
Stagflation is a period when economic growth is stagnant but when prices rise. Recession is at least two quarters of negative economic growth.
Source: Reuters
Sphere: Related ContentPresident Passes Stimulus Plan Into Action
President Bush signed a stimulus plan Wednesday morning. This stimulus plan is estimated to cost $168 billion dollars. Most people in the country will get a “rebate” check that will range from $300-$1200, those checks will begin to be mailed out in May. This is a Band-Aid for a broken arm, and will probably harm the economy in the long run.
WASHINGTON - President Bush on Wednesday signed a multibillion-dollar economic rescue package on Wednesday that means $300 to $1,200 rebates for many American households.
Bush called the measure “a booster shot for our economy” to stave off a recession.
Several dozen members of Congress, including House Speaker Nancy Pelosi, stood on the stage behind Bush as he signed the bill.
Rebates are to go out beginning in May to taxpayers and low-income people, including seniors living off of Social Security and veterans who depend on disability checks. Businesses would get tax breaks for investing in new plants and equipment.
Most taxpayers will receive a check of up to $600 for individuals and $1,200 for couples from the Internal Revenue Service, with an additional $300 per child. People earning at least $3,000 and those who owe little or no taxes would get $300 for singles, $600 for couples. Those making more than $75,000 and couples with income exceeding $150,000 are to get smaller rebates — $50 less per $1,000 they make over those thresholds.
Economic analysts generally believe the $168 billion package Bush signed will help prevent the current downturn from ballooning into a crisis. But if the rebates don’t spur a consumer spending spree strong enough to cure what ails the economy, Congress is ready to throw more money at the problem. Bush said the measure was “large enough to have an impact.”Democrats and Republicans who put aside deep differences to craft the plan and rush it to enactment joined the president at the White House for the signing ceremony in the East Room. The package is designed in part to inoculate lawmakers from voter blame should the economy continue to lag as the November elections bear down.
Congressional leaders already are considering more economic rescue measures that could include transportation spending, unemployment aid and measures to address the housing crunch that’s at the root of the current economic doldrums.
In the meantime, economists are debating how effective the rebates will be, with critics arguing that debt-burdened consumers will use the money to pay bills rather than spending the checks and spurring growth.
Source: MSNBC
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Bush Announces The Largest Budget In History
President Bush announced a 3.1 trillion dollar budget proposal, which is the largest in the history of the United States. He sent the proposal on Monday, and the crying and moaning has already begun. Click here to view the budget.
WASHINGTON - President Bush sent the nation’s first-ever $3 trillion budget proposal to Congress on Monday, contending that the spending blueprint will fulfill his chief responsibility to keep America safe.
The $3.1 trillion proposed budget projects sizable increases in national security but forces the rest of government to pinch pennies. It seeks $196 billion in savings over five years in the government’s giant health care programs - Medicare and Medicaid.
But even with those restraints, the budget projects the deficits will soar to near-record levels of $410 billion this year and $407 billion in 2009, driven higher in part by efforts to revive the sagging economy with a $145 billion stimulus package.
Bush called the document, which protects his signature tax cuts, “a good, solid budget” But Democrats, and even a top Republican, attacked the plan for using budgetary gimmicks to claim the budget can return to balance in 2012, three years after Bush leaves office.
Democrats called Bush’s final spending plan a continuation of this administration’s failed policies which wiped out a projected 10-year surplus of $5.6 trillion and replaced it with a record buildup in debt.
Source: MSNBC
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Economic Stimulus Plan May Cost $150 Billion
Republican and Democratic Leaders are in meetings to develop an economic stimulus plan to help the sluggish economy in this election year. Part of the stimulus plan currently in the works do involve giving a rebate, similar to what was done in 2001. This stimulus plan is suppose to help the failing economy from going into a recession. Lawrence Summers was Treasury Secretary during part of President Bill Clinton’s tenure. His original estimate for money needed for a stimulus plan was up to $75 billion half of what the top end estimate is now of $150 billion, considering. He is currently working with Republicans and Democrats in meetings, trying to hammer out an agreeable plan to all. Right now, it seems that the politicians are solely concerned about this now because it is an election year. The democratic senators and representatives do not want to extended the Bush tax cuts, and in the past that has keep anything from moving forward , in the past Republican members of Senate and congress have wanted to extend the Bush Tax Cuts. The Republican members of senate and congress, have now said that if that the tax cuts aren’t included that it won’t be a deal breaker. The economy is certainly in a state of disrepair, and it needs to be fixed. Now is this stimulus plan the answer? Probably not.
Barack Obama’s Advisors Show Economic Stimulus Plan
Democratic Sen. Obama advisor’s Governor Tim Kaine (VA), economic adviser Austan Goolsbee and Bill Daley (Clinton Secretary of Commerce) debuted an economic stimulus plan Sunday (1/13). The plan involves dumping $75 billion in the current economy and and keeping $45 billion on hold in the federal reserve in case it is needed over the next three months (a total of $120 billion, or as most people call it pocket change). Sen. Obama is trying to get congress along with the president to pass this stimulus plan now, not waiting to try and save it until or if he gets elected.
The plan, which would give middle income families tax relief now, and to help offset inevitable decline around the economy. This plan does involve raising taxes, which is always a popular move among the American Public. Maybe he should wait until he gets elected to try this stimulus plan.
Photo Source: transplantedmountaineer/flickr
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