Saturday, August 27, 2005

Greenspan says boom to "simmer down"

Find the full text of Greenspan's Saturday remarks at this link.

Photo by Evan Vucci - AP

In a speech Saturday at the close of the Kansas City Fed symposium in Jackson Hole, Wyoming, Federal Reserve Chairman Alan Greenspan said the housing boom will inevitably end, which in turn should slow spending and could lead to a price reduction in the market. Here's an excerpt from the Bloomberg coverage:
"The housing boom will inevitably simmer down,'' Greenspan said in the text of a speech . "As part of that process, house turnover will decline from currently historic levels, while home price increases will slow and prices could even decrease.''

Greenspan's comments suggest economic growth would slow as the housing surge subsides, reducing pressure on central bankers to raise interest rates and helping ease imbalances in the world's largest economy. A day earlier Greenspan urged investors not to forget about the possibility that asset prices may fall.

The eventual end of the boom will cause U.S. consumers to take out fewer home-equity loans, giving them less money to spend. That in turn may increase the savings rate and ease the import-driven current account deficit, he said, adding that the shift needn't be "wrenching'' if the economy remains flexible.
Find the Bloomberg story at this link
Find the MarketWatch coverage at this link.
Find the Washington Post coverage at this link.

*** UPDATE: U.S. News and World Report story headlined "Greenspan's tenure: From bust to bust?" By Paul J. Lim at this link.

— The Boy in the Big Housing Bubble