Greenspan Worries About Economic Health Friday August 26, 10:08 am ET By Jeannine Aversa, AP Economics Writer Federal Reserve Chairman Greenspan Voices Concerns About Long-Term Health of U.S. Economy JACKSON, Wyo. (AP) -- Creeping trade protectionism and bloated budget deficits pose a risk to the United States' long-term economic vitality, Federal Reserve Chairman Alan Greenspan warned Friday. "Developing protectionism regarding trade and our reluctance to place fiscal policy on a more sustainable path are threatening what may well be our most valued policy asset: the increased flexibility of our economy, which has fostered our extraordinary resilience to shocks," the Fed chief said in a speech to an economic conference here, sponsored by the Federal Reserve Bank of Kansas City. http://biz.yahoo.com/ap/050826/greenspan.html?.v=4
this is the AP version, which they obviously couldn't wait to publish. My guess is that the full body of his remarks emerge with an emphasis that doesn't quite match that suggested here.
He states also there an economic imbalance with the housing boom .... "The developing protectionism regarding trade and our reluctance to place fiscal policy on a more sustainable path are threatening what may well be our most valued policy asset: the increased flexibility of our economy, which has fostered our extraordinary resilience to shocks. If we can maintain an adequate degree of flexibility, some of America's economic imbalances, most notably the large current account deficit and the housing boom, can be rectified by adjustments in prices, interest rates, and exchange rates rather than through more-wrenching changes in output, incomes, and employment. The more flexible an economy, the greater its ability to self-correct in response to inevitable, often unanticipated, disturbances. That process of correction limits the size and the consequences of cyclical imbalances. Enhanced flexibility provides the advantage of allowing the economy to adjust automatically, reducing the reliance on the actions of monetary and other policymakers, which have often come too late or been misguided. "