TOKYO – Former Federal Reserve Chairman Alan Greenspan today said a U.S. recession, though possible, is not probable this year as excess inventory is being reduced quickly, according to people attending a CLSA Japan Forum in Tokyo.
“By the end of the year, there is the possibility, but not the probability of the U.S. moving into recession,” Greenspan said, according to notes taken by Bernard Key, a former economics professor at Tama University in Tokyo, Bloomberg News said.
Three days ago, in comments some traders say contributed to the next day’s stock plunge, Greenspan told a Hong Kong audience he couldn’t rule out a recession this year, according to Associated Press reports. That statement was “probably misinterpreted, that’s why we see a clarification today,” Glenn Maguire, chief Asia economist for Societe Generale SA in Hong Kong,” told Bloomberg News. “To hint at the possibility of a recession won’t make [current Fed chief Ben S.] Bernanke’s life any easier,’’ he added.
Today, Greenspan said that current low yield premiums aren’t sustainable, profit margins are peaking and the U.S. growth cycle is in a mature phase. He said that previous experience suggests a flattening of profit margins should produce a recession, but in the global economy, that pattern may not be repeated, according to a fund manager who attended the presentation.
Greenspan spoke via satellite video link. The CLSA wouldn’t comment on his presentation, but Key’s notes were confirmed by four other attendees, who declined to be identified.
