US recession this year a strong possibility, says Greenspan

FORMER Federal Reserve chairman Alan Greenspan says there’s a one-third probability of a US recession this year and that the current expansion won’t have the staying power of its decade-long predecessor.

"We are in the sixth year of a recovery; imbalances can emerge as a result,” Mr Greenspan, 81, said in an interview yesterday at his office in downtown Washington.

“Ten-year recoveries have been part of a much broader global phenomenon. The historically normal business cycle is much shorter and is likely to be this time.” Mr Greenspan’s outlook contrasts with the prediction of his successor, Ben S. Bernanke, who told Congress last week that the economy may strengthen this year. Mr Bernanke’s upbeat assessment helped steady stock markets on February. 28 after a plunge the day before that some traders attribute partly to Mr Greenspan’s musing that a recession couldn’t be ruled out.

“It is possible that we can have a recession at the end of this year,” said Mr Greenspan, who ran the central bank for 18 years until January 2006. Mr Bernanke, 53, declined to comment.

Little more than a year after leaving the central bank, Mr Greenspan is returning to economic forecasting, a role he enjoyed before entering government service in 1974, during the Ford administration His unique discipline both frustrated and amazed Fed colleagues, especially those trained in sophisticated economic modelling.