news.yahoo.com/s/ap/20050827/ap_on_bi_ge/greenspan
Click Here He also renewed a warning on Saturday about the sizzling housing market, saying home prices may fall, slowing consumer spending, a chief ingredie nt for the economy's good health. Greenspan's remarks wrapped up a two-day conference, sponsored by the Fed eral Reserve Bank of Kansas City, on the "Greenspan Era."
Looking ahead, Greenspan predicted the Fed "will almost surely face as ma ny uncertainties over the next 18 years as it has over the past 18." Technology continues to bring rapid change and uncertainty to the marketp lace, he said. The aging US population and long-term federal budget de ficits, if left unchecked, are concerns. "Surely difficult challenges lie ahead for the Fed, some undoubtedly of o ur own making, and others that will be thrust on us by market or other f orces," Greenspan said. Whatever may come, he said he had "little doubt that my successors, and t heirs, will continue to sustain the leadership of the American financial system in an ever-widening global economy." Drawing frequent mentions for Greenspan's job are: _Martin Feldstein. An economics professor at Harvard University and presi dent of the National Bureau of Economic Research, he advised Bush when t he Texas governor ran for president in 2000. Dean of Columbia University's graduate school of busin ess and an economics professor, he was Bush's chief economic adviser fro m 2001 to 2003. Also discussed for a post-Greenspan era are Donald Kohn, a member of the Fed board; John Taylor, an economics professor at Stanford University; and Larry Lindsey, former economic adviser to Bush and ex-member of the Fed. All but Lindsey attended the economic conference, which served as a goodb ye salute to Greenspan. "It was a toast, not a roast," Laurence Meyer, a former Fed member who se rved with Greenspan, said in an interview. "More than anything, the new chairman will need to be able to make decisi ons on the fly and exercise good judgment," something for which Greenspa n was hailed, Meyer said. The housing market, not Fed succession, was on Greenspan's mind Saturday. "The housing boom will inevitably simmer down," Greenspan said. "As part of that process, house turnover will decline from currently historic lev els, while home price increases will slow and prices could even decrease ." A day earlier, he cautioned the public against thinking the value of home s and other investments will only go higher. "History has not dealt kind ly" with that kind of optimism, he said. If house prices fell suddenly or if interest rates rose quickly, it could clobber homeowners and lenders. Rising prices have helped make many people feel wealthier and thus more i nclined to spend. Consumer spending accounts for roughly two-thirds of a ll economic activity. Greenspan said people taking cash out of their homes through refinancing, selling or other financial arrangements will ease along with "some of t he strength" in consumer spending. The estimates of how much consumer sp ending will ease differ widely, he said. An end to the housing boom and a moderation in consumer spending, however , could have a silver lining, Greenspan said. It could lead to a boost in the personal savings rate, now dismally low, and could curb the public's insatiable appetite for foreign-made goods, helping to narrow the country's trade deficit, he said. The broadest measure of trade, called the current account deficit, reache d a record $668 billion last year. Looking back at his tenure, Greenspan said he would miss the lively debat es on economic topics with his Fed colleagues. Debates on the merits of central banks to use interest rates to prick per ceived price bubbles in stocks, houses or other financial assets may int ensify in the years ahead, he said. "But, given our current state of knowledge, I find it difficult to envisi on central banks successfully targeting asset prices any time soon," Gre enspan said. When Greenspan finished speaking, he received a standing ovation from the economists, central bankers, academics and other economic elite. A message written by Greenspan's legendary cigar-smoking predecessor, Pau l Volcker, was read aloud. He said Greenspan had chalked up "quite a rec ord" and told him, "There are still mountains to be climbed."
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Federal Reserve Chariman Alan Greenspan pauses while testifying on Ca pitol Hill in this Feb. With Greenspan expected to retire early next year, econo mists and other Fed watchers are debating what defined the Greenspan era at the central bank and what his legacy will be.
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