Thursday, March 01, 2007



U.S. slump possible, not probable: Greenspan quoted

Thu Mar 1, 2007 6:19am ET136

TOKYO (Reuters) - Former Federal Reserve Chairman Alan Greenspan was quoted as saying on Thursday that a recession in the United States is possible, though not probable this year as inventory problems in the economy are being addressed quickly, Bloomberg reported.

Greenspan spoke via a satellite link at a forum held by CLSA Japan, and his comments were quoted by a few of the participants, Bloomberg said. The forum was closed to the media.

"By the end of the year, there is the possibility, but not the probability of the U.S. moving into recession," Greenspan told the forum, according to notes by Bernard Key, a former economics professor at Tama University in Tokyo, who attended the event and spoke to Bloomberg.

There are specific housing and general inventory problems that are being addressed quickly, but need to be carefully monitored, he was quoted as saying.

Greenspan's reported comments came a day after Federal Reserve Chairman Ben Bernanke said this week's stock market drop had not changed the Fed's view that the U.S. economy was sound.

On Tuesday, the U.S. stock market suffered its worst slide since 2001, as a sell-off in China's stock market raised fears equity valuations were too high.

Bernanke also said a downward revision on Wednesday in the government's estimate of fourth-quarter economic growth -- to a 2.2 percent annual pace from an initial 3.5 percent reading -- was in keeping with the Fed's view of the economy.

Greenspan also told the forum that current yield premiums are not sustainable, profit margins are peaking and the U.S. growth cycle is in a mature phase, Bloomberg reported.

He also said previous experience suggested that when profit margins flatten, there could be a recession, adding that globalization of the economy may mean that pattern may not repeat this time, according to a fund manager who attended the forum.

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