Former federal reserve chairman Alan Greenspan can’t stop saying ‘boo’ to the boom. Today he warned of the potential for a big drop in the Chinese stock market and fallout for the global economy.
Addressing a meeting in Madrid via teleconference, Greenspan said the recent boom in Chinese stocks could not last.
“It is clearly unsustainable,” he said “There’s going to be a dramatic contraction at some point.”
“In the last five years, the world as a whole is a growing faster than at any time in the world’s history,” he said. “It can’t last and it won’t last because it’s a one-shot adjustment.”
Greenspan said asset prices around the world could fall but that the economy may escape unscathed if it were flexible enough to absorb asset price shocks.
“We will get major declines in certain levels but it need not feed back significantly to levels of employment or the real economy,” he said.
Earlier this month, Greenspan reiterated that he believed there was a one-third chance the U.S. economy, the world’s largest, would slip into recession this year.
Jeez, maybe they should call the guy ‘gloomspan’ his announcement today gave some investors jitters and knocked the North American market back a bit. Just to be safe I’m going to buy some local real estate because I hear prices can never go down there.