A Hat-Trick for Alan Greenspan

Greenspan Says 2.5% Growth Possible in Third Quarter (Update1)

By Steve Matthews

Aug. 2 (Bloomberg) — The most severe recession in at least five decades may be ending and growth may resume at a rate faster than most economists foresee, former Federal Reserve Chairman Alan Greenspan said.

“We may very well have 2.5 percent in the current quarter,” Greenspan said in an interview today on ABC’s “This Week” program. “The reason is there has been such an extraordinarily high rate of inventory liquidation that the production levels are well under consumption.”

The U.S. economy contracted at a better-than-forecast 1 percent annual pace in the second quarter, the Commerce Department reported July 31. Stabilization of housing markets and consumer spending, a lessening of financial turmoil and increased government spending all suggest the longest recession since the 1930s may be close to ending.

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Alan Greenspan, perhaps the most widely discredited economist of the last half-century, channeled Ayn Rand and came up with another wrong prediction.
Conservatively, that’s three–a hat-trick in hockey lingo.

He missed the dotcom bubble, then missed the real estate bubble and is now ready to double-down on a recovery. Not to worry that unemployment continues to grow, nor that there’s still about $60 trillion out there in worthless credit-default swaps. Not a problem that credit-card defaults are at an all-time high and the consumer debt pile-on encouraged by skyrocketing home equity loans are on the brink of collapse.

God is in the details and Alan must be praying to God for restoration of a shattered reputation. But it’s nice that we’ve had a good two weeks in the markets, buoyed by accounting changes and the hocus-pocus of what Goldman Sachs calls ‘an increasing willingness to leverage risk.’

There are those who think it may be a bit early (like two or three years) to celebrate by breaking out the champagne. Count me among them.

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