Financial Trends of the 21st Century

[MrT1955]

Greenspan warning

Mr Greenspan also warned of a potential fall in global asset prices, stressing that the ample liquidity currently in the financial system appeared to be an “abnormal situation” and could not last forever.

He said the source of this liquidity was the market value of assets worldwide, which had been rising faster than nominal gross domestic product globally due to a decline in real long-term interest rates and a significant fall in real equity premiums.

“A good part of this expansion is a direct function of the decline in real equity premiums. That cannot go on indefinitely,” he said.

“I don’t know when the liquidity is going to decline but I am reasonably certain that what we’re looking at is an abnormal situation.”

http://news.ft.com/cms/s/778d9570-c9e5-11da-852f-0000779e2340.html