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Alan Greenspan is in the news again. The former Fed chair now thinks there’s a 1-in-3 chance of a recession. Or more specifically, he said:

At the moment, I still say as I said before, by algebraic implications, the odds are 2 to 1 we won't have a recession.

Oh dear lord. He can’t even deliver a simple declarative sentence. I think half the battle of making everyone think you’re a genius is simply being convoluted. Also, start dropping phrases like "algebraic implications."

So, let’s take a closer look at what Greenspan is really saying.

I looked at the data from the last 20 years. Of the last 80 quarters, real GDP declined for five quarters and growth came in below 2% for 22 quarters. This means that economy is close to recession levels for one-quarter of the time. (I'm being pretty liberal in my definition, but you get the point.)

Despite his algebraic implications, Greenspan is hardly making a bold prediction. This is almost like saying that there’s a 1-in-5 chance that any given day is Saturday.

Why is this news?

Posted by edelfenbein at May 11, 2007 10:36 AM