Former Federal Reserve Chairman Alan Greenspan says the U.S. economy is building momentum and the risk of a double-dip recession has faded significantly.
“There is a momentum building up which is really just beginning, and it’s got a way to go,” Greenspan said Sunday on ABC’s “This Week,” when asked about Friday’s report that 162,000 jobs had been created in March.
Greenspan said corporate investment in new equipment “is coming back in a fairly substantial way” and that purchasing managers are building up product inventories for the first time in months.
“There’s a shortage of inventories out there and we’re on the edge of a significant build-up,” he said. That build-up, he says, will produce a “self-reinforcing” cycle.
“The momentum is very clearly there, and I doubt very much that we’re going to run out of that momentum until very late in the year,” said Greenspan, who was Fed chief from 1987 to 2006.
He also predicted there was now little chance of the double-dip recession that many feared.
“I think the odds of that have fallen very significantly in the last two months," he said.
It's not just the jobs, Greenspan argued, saying that 401(k) accounts have added $600 billion in recent months.
He also believes a bubble in commercial real estate has already popped. “Real estate prices generally are down 50 percent,” Greenspan said. “With prices already down and adjusted, if we were going to get severe secondary reactions, they would have occurred, and they would have occurred if it weren’t for the fact that the rest of the economy is showing some degree of buoyancy.”
Greenspan also responded to criticism from hedge fund manager Michael Burry about why — when he was Fed chairman — he didn't see the subprime mortgage crisis coming.
Greenspan said he was one of the "vast majority of people" who were "wrong about the complexity of what was about to emerge."
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