Former U.S. Federal Reserve chairman Alan Greenspan said on Thursday that there is not yet any evidence that the slowing US housing market has negatively impacted on the wider economy.
Mr Greenspan, who caused alarm last month when he said the possibility of the economy moving into recession later this year was not out of the question, said consumer demand was still strong despite a fall-off in housing activity. "A spillover may still happen but boy it's hard to find any such evidence" he said in a speech in the Futures Industry Association conference in Boca Raton, Florida. Greenspan said the threat of declining house prices was of much greater concern than the ailing subprime mortgage market. "What we're dealing with is something which is more an issue of house price than it is of mortgage credit" Greenspan said. A considerable part of consumption growth over the past few years has been attributable to the "substantial rise in the capital gains of homes" Greenspan said, adding that this could reverse on a decline in prices. Greenspan initially addressed concerns about the U.S.'s status as the world's leading financial centre and its competitiveness with the U.K. and Asian financial centers. He said the U.S. has had the "misfortune" of being a financial superpower for many years. "When you're at the top, there's only one direction you can go," he said. "It's not as though we in the U.S. have lost competitiveness" he said. But, he pointed out that "it's inevitable that the market value of U.S. exchanges relative to rest of world is going to go down, or rather won't go up as fast." "The rest of the world has moved ... towards the capitalist model that we've been functioning under for generations", said Greenspan.