Greenspan Grapples With Crisis

Alan Greenspan,former Federal Reserve Chairman,clearly has continued to wrestle with financial issues,if his recent comments are any guide.The stock market is not merely an indicator,he points out;it's a cause of economic activity.The data show that most people do not distinguish between paycheck income and their 401k appreciation.And upper income persons account for 45% of personal income expenditure.
Because of this effect,an underperforming stock market tends to crimp the consumer spending so vital to economic health,it has been observed.
The problem is,industrial production rose fairly steadily until the last week in May,and then it stopped dead.There is a normal pause in economic recoveries,but we are coming out of the greatest global economic crisis the world has ever seen.This recovery has continued to be dominated by large banks and big business.The small banks are loaded up with commercial real estate loans-the worst possible loans-so they aren't lending.
The problem in job growth is the extraordinary growth in productivity.It's still showing growth at a tremendous pace.This is much too much.There is surely a short term fear factor.The average hourly work week has been going up.
As long as that is the case,companies won't be hiring many new workers.It means they're just piling more work on the existing staff.
A big regulatory response to the financial crisis is appropriate,but you have to depend on the owners and managers to protect their equity.There is nothing that beats counterparty surveillance.A small little group of government auditors can't do much of any significance,in Mr.Greenspan's opinion.
Alan Greenspan continues to serve the nation long after he left office by applying his intellect to the current situation,clarifying it,or at least stimulating discussion with his comments.