Alan Greenspan Past Quotations

The recent period has been marked by a transformation to an economy that is more productive as competitive forces become increasingly intense and new technologies raise the efficiency of our businesses...While these tendencies were no doubt in train in the "old," pre-1990s economy, they accelerated over the past decade as a number of technologies with their roots in the cumulative innovations of the past half-century began to yield dramatic economic returns.

But how do we know when irrational exuberance has unduly escalated asset values, which then become subject to unexpected and prolonged contractions as they have in Japan over the past decade?

Clearly, sustained low inflation implies less uncertainty about the future, and lower risk premiums imply higher prices of stocks and other earning assets. We can see that in the inverse relationship exhibited by price/earnings ratios and the rate of inflation in the past. But how do we know when irrational exuberance has unduly escalated asset values, which then become subject to unexpected and prolonged contractions as they have in Japan over the past decade?

We cannot rule out a situation in which a preemptive policy tightening becomes necessary, ... Such caution seems especially warranted with regard to the sharp rise in equity prices during the past two years. These gains have obviously raised questions of sustainability.

It seems superfluous to constrain trading in some of the newer derivatives and other innovative financial contracts of the past decade. The worst have failed; investors no longer fund them and are not likely to in the future.

There have been signs recently that some of the forces that have been restraining the economy over the past year are starting to diminish and that activity is beginning to firm,

as many uncertainties over the next 18 years as it has over the past 18.

Because there was little retrenchment during the cyclical downturn, the potential for a significant acceleration in activity in the household sector is likely to be more limited than in past business cycles,

Over the past decade, the U.S. economy has benefited from a remarkable acceleration of productivity. But experience suggests that such rapid advances are unlikely to be maintained in an economy that has reached the cutting edge of technology.

Over most of the past several years, the behavior of unit labor costs has been quite subdued, ... But those costs have turned up of late, and whether the favorable trends of the past few years will be maintained is unclear.

Hopefully his successor, whoever it is, will demonstrate that the good policy we've had over the past 18 years is as much due to the evolution of the institution as it is to Greenspan per se.

Many homeowners might have saved tens of thousands of dollars had they held adjustable-rate mortgages rather than fixed-rate mortgages during the past decade.

The more flexible an economy, the greater its ability to self-correct after inevitable, often unanticipated disturbances, ... The impressive performance of the U.S. economy over the past couple of decades, despite shocks that in the past would have surely produced marked economic contraction, offers the clearest evidence of the benefits of increased market flexibility.

How do we know when irrational exuberance has unduly escalated asset values, which then become subject to unexpected and prolonged contractions as they have in Japan over the past decade?

... the flexibility of our market-driven economy has allowed us, thus far, to weather reasonably well the steep rise in spot and futures prices for crude oil and natural gas that we have experienced over the past two years,

The Federal Reserve has responded to the balance of market forces by gradually raising the federal funds rate over the past year, ... Certainly, to have done otherwise -- to have held the federal funds rate at last year's level even as credit demands and market interest rates rose -- would have required an inappropriately inflationary expansion of liquidity.

The growing stability of the world economy over the past decade may have encouraged investors to accept increasingly lower levels of compensation for risk.

Although the business cycle has not disappeared, flexibility has made the economy more resilient to shocks and more stable overall during the past couple of decades,

Although household spending should continue to trend up, the potential for significant acceleration in activity in this sector is likely to be more limited than in past cycles,

will almost surely be reported as one of the largest advances, if not the largest, posted over the past 30 years.

The impressive performance of the U.S. economy over the past couple of decades, despite shocks that in the past would have produced marked economic contractions, offers the clearest evidence of the benefits of increased market flexibility,

The changes in the budget outlook over the past several years are truly remarkable, ... We need to resist those policies that could readily resurrect the deficits of the past and the fiscal imbalances that followed in their wake.

Until we experience an economic slowdown, we will not know for sure how much of the extraordinary rise in output per hour in the past five years is attributable to the irreversible way value is created and how much reflects endeavors on the part of the business community to stretch existing capital and labor resources in ways that are not sustainable over the long run,

By far the most significant event in finance during the past decade has been the extraordinary development and expansion of financial derivatives.