Greenspan: Beware of False Dawn Pressuring Economy

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July 30 (Bloomberg) -- Former Federal Reserve Chairman Alan Greenspan comments on second-quarter GDP climbing to 4 percent and warns of possible problems in future economic data. He speaks with Betty Liu on “In the Loop.”



greenspan, let me first ask you about the gdp numbers that came out half an hour ago.

They show that the economy is recovering a little bit better than what most had expected, including you.

What do you make of that?

I think it is right.

What the data that come out this morning do is close the discrepancy.

We have seen an industrial discrepancy index rising recently and the real gdp.

Implicit in the gdp is a factory value of the elements that make up industrial production.

You can see the gap was there and it was not clear which direction it was going to close.

This morning, we got the answer.

Industrial production was the right numbers and the gdp was not.

Right ok, so for you it is the closing of the gap on what are two very disparate sets of numbers.

Do you see that momentum continuing?

In the near-term, yes, i do.

And the reason i do is we are getting clear indications from lots of different areas where new, positive things are happening.

The key question down the road, of course, is the issue is whether, in fact, we are looking at another false dawn, or some set of numbers that are going to run into problems.

Because remember, the real critical question you have to answer during this particular time is that with labor markets gradually and increasingly tightening, and indeed other areas tightening up, all of them are indicating that at this stage we will run into upside pressures in the money markets and inflation sooner than most of us had expected.

That is still an open question.

It is an open question, and one that the fed is wrestling with.

Do you believe that the longer they stayed easy here on interest rates the further they will fall behind the curve?

I have not commented on actual activities of monetary policy.

I do comment, and i am willing to comment on the structure of

This text has been automatically generated. It may not be 100% accurate.


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