Greenspan Rebuts Stiglitz

I am adding this short article from Market Watch, because it is Alan Greenspan's rebuttal of the comments by Joseph Stiglitz in an earlier post.

Nobel Prize-winning economist Joseph Stiglitz said in an interview published Friday that he's "very pessimistic" about the U.S. economy and thinks former Federal Reserve Chairman Alan Greenspan is partly to blame for the situation.

There's a 50% chance that the U.S. will sink to recession as the subprime mortgage fallout cuts off financing for U.S. consumers, Stiglitz said in the interview with Bloomberg News. The economist also predicted growth would slow to less than half of its 3% potential.

"Alan Greenspan really made a mess of all this. He pushed out too much liquidity at the wrong time," Stiglitz said.

Greenspan responded that Stiglitz's criticisms were "inaccurate or incomplete," the report said.
The former Fed chairman said the surge in U.S. home values resulted from the "dramatic" drop in rates on long-term fixed-rate mortgages, which itself was a result of a broader fall in long-term interest rates also experienced in other countries. Greenspan disputed Stiglitz's claim that during his tenure as Fed chairman, he encouraged people to take out variable-rate mortgages.