Greenspan leaves warning in Kansas

| August 29, 2005 | 0 Comments
Greenspan leaves warning in Kansas

Retiring Federal Reserve chairman Alan Greenspan left a warning with economists attending the Kansas City Federal Reserve’s annual conference with a warning about bidding home and stock prices too high in the belief that markets cannot reverse direction.

Included in his audience were several possible successors to the job Mr. Greenspan has held for almost 20 years. Mr. Greenspan emphasized the fact that whoever succeeds him will face a number of major issues, including growing trade deficits, increasing protectionism, record housing prices, and the potential economic impact of rising oil prices.

One issue that Mr. Greenspan mentioned was the increasing budget deficit that threatens to trigger higher inflation as baby boomers reach retirement age, and the pressure that will be put on the Federal Reserve to cushion the shock that inflation would be on the economy.

He also cautioned that setting numeral targets on inflation could not substitute for the study of data before making policy recommendations.

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