Do you think Alan Greenspan's comments about a possible recession will become a self-fulfilling prophecy?
Answer:
No. Recessions are a natural part of the business cycle. First you have expansion, then you have a recession. So in this respect, Greenspan is just making an educated guess that it is about time for a recession as the economy has been expanding for quite some time and is now beginning to slow. The good news is that recessions have been getting shorter and less severe over the past few decades, so by the time that we realize that we are indeed in a recession, it will be nearing its end. The recession will not be nearly as bad as the last one that we had, and we survived that with very little problem.
I think Allen Greenspan should butt out.
Examining and evaluating the facts closely prior to making a prediction gives people an edge in "prophesying" the inevitable.
Remember that economics is a "Social science". This basically means that results are based on the behavior of people. Knowing this, we can see that, if enough people believe Alan Greenspan, then they will act accordingly (that is: spending less to try to brace for a recession). This will mean less consumption, which will mean less production, which will mean layouts... and so on.
What it really boils down to is: How many people believed Greenspan? Enough to make a dent in US consumption?
Recessions are always relative or related to statistics and definition of hierarchal structures . transaction volumes might go down causing a streamlining phase in the economy with an effect on earnings and savings as well as elemental and intermediate resources.Resource allocation as well as initiative motivation innovation and resource distribution will be required to mediate the (now felt) outward flow of resource demand and capital restraints and keep macro and micro economic balance. P.S. Greenspan is too smart to short-sheet his own bed,He is basically marshalling people to evaluate their positions and strengthen determination
I think his comments may precipitate a more bullish market, but in and of themselves they aren't sufficient to bring firms to layoffs and decreases in production. The stock market can drop without the nation entering a recession.
At the same time, it's a reasonable contention that if the nation is entering a recession, the stock market will turn bullish, and if Greenspan observes it as such, he's viewing the symptom of the underlying problem.
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