[NYTr] "Stagflation" Moans Greenspan

[All the News That Doesn't Fit]

sent by anon at mouse.com - activ-l

Greenspan Continues "Operation Destroy USA"

[Whatever the economic facts he helped create, be assured he's very
conscious of the effects his words will have on the markets and the
dollar.  This is a replay of 1930, with the fed again administering the
looting of america.  Boycott fake money!]

Reuters via Yahoo - Dec 16, 2007
http://news.yahoo.com/s/nm/20071216/bs_nm/usa_economy_greenspan_dc

Greenspan sees early signs of U.S. stagflation

WASHINGTON (Reuters) - The U.S. economy is showing early signs of
stagflation as growth threatens to stall while food and energy
prices soar, former U.S. Federal Reserve Chairman Alan Greenspan
said on Sunday.

In an interview on ABC's "This Week with George Stephanopoulos,"
Greenspan said low inflation was a major contributor to economic
growth and prices must be held in check.

"We are beginning to get not stagflation, but the early symptoms
of it," Greenspan said.

"Fundamentally, inflation must be suppressed," he added. "It's
critically important that the Federal Reserve is allowed politically
to do what it has to do to suppress the inflation rates that I see
emerging, not immediately, but clearly over the intermediate and
longer-term period."

The U.S. central bank has lowered its benchmark interest rate three
times since mid-September as a housing downturn, tightening credit
conditions, and steep food and energy prices threaten to push the
U.S. economy into recession.

But cutting rates can have the unwanted side effect of pushing up
prices, so the Fed finds itself in a tricky position of trying to
revive growth without spurring inflation.

Last week, U.S. data showed that wholesale inflation rose at the
highest rate in 34 years, while consumer prices rose the most in
more than two years.

Greenspan repeated his assessment that the probability of a U.S.
recession had moved up toward 50 percent but noted that corporate
America's debt levels were in good shape, which should help cushion
the blow from tightening credit terms.

"The real story is, with the extraordinary credit problems we're
confronting, why the probabilities (of recession) are not 60 percent
or 70 percent," he said.

"Because of the decline in long-term interest rates for a protracted
period of time, American business was able to fund a significant
part of its short-term liabilities and take out low-cost, long-term
debt, so the credit needs have not been all that large," he said.

Greenspan has drawn some criticism for keeping the trendsetting
federal funds rate at a low 1 percent from June 2003 through June
2004, which some argue contributed to a housing bubble that is now
bursting spectacularly.

Greenspan said real estate prices will stabilize only when the
overhang of unsold new-construction homes begins to ease, and
estimated that financial losses could be in the range of $200 billion
to $400 billion as securities tied to failing subprime mortgages
lose value.

He warned against any sort of government bailout plan for homeowners
that interfered with the normal functioning of markets for home
prices or interest rates, saying it would "drag this process out
indefinitely." Offering cash to stricken homeowners instead would
cause less long-term damage, he said.

"It's only when the markets are perceived to have exhausted themselves
on the downside that they turn," he said. "Trying to prevent them
from going down just merely prolongs the agony."

(Reporting by Emily Kaiser; editing by Steve Orlofsky)