More support for the asset-based economy status quo from Sir Alan Greenspan


With stocks now up significantly from March 2009 lows, a mild correction has been underway for the past two weeks.  Even if it risks becoming a major correction, we will still be well above levels just 6 months ago.  But that has Alan Greenspan worried.

Business Week reports:

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Former Federal Reserve Chairman Alan Greenspan said a U.S. economic recovery is “going to be a slow, trudging thing,” and that he “would get very concerned” if stock prices continue to fall.

A drop in stock prices is “more than a warning sign,” Greenspan said yesterday on NBC’s “Meet the Press” program. “It’s important to remember that equity values, stock prices, are not just paper profits. They actually have a profoundly important impact on economic activity.”

Keep that stock market up or the assets underpinning bank balance sheets and the fake recovery will fall in value. That is bad news for you recovery fans.

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Sir Alan has spoken.

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