HIGHLIGHTS OF GREENY TESTEMONY
Enviado: 15/7/2003 17:55NEW YORK, July 15 (Reuters) - Following are selected comments from the question-and-answer session following Federal Reserve Chairman Alan Greenspan's testimony to the House Financial Services Committee.
Transcript provided by FDCH Washington Transcript Service.
ON GROWTH PROSPECTS
"It is certainly the case that confronted with a period of low inflation and low risk premiums and quite favorable financial conditions, that we could very well be embarking on a period of extended growth, especially when, as I indicated in earlier testimony, it appeared as though the sharp market declines and decline in economic activity in the year 2000 and into 2001 largely reflected a break in a pattern of capital investment expansion which have not been completed."
"So if we can ever return to a state of business confidence, there is, in my judgment as I've indicated previously, a fairly substantial backlog of unexploited, profitable investment opportunities in the capital goods markets."
ON THE BACK-UP IN BOND YIELDS:
"Well, we clearly expected that, because you may recall just prior to that (June FOMC) meeting there was a expected probability, as reflected in the federal funds futures market, of a fairly good chance of a 50 basis point cut rather than the one we chose, namely 25 basis points. So we clearly expected that the markets would adjust."
ON RAISING RATES
"Well, if the recovery is indeed fragile, as you imply, I would suggest to you it is unlikely that we would be moving rates. As I indicated in my prepared testimony, we would seek significant improvement in the performance from what we currently see before that is even on the table."
ON JOBS AND PRODUCTIVITY
"If, and as we strongly expect, that the growth rate will be picking up in the months ahead and rising above the relevant rate of productivity, then clearly increased work forces will be required to meet the increased growth. That's our forecast, that's what I expect to happen, and, indeed, what I think the vast majority of economists examining the American economy expect to happen."
ON CHINA'S EXCHANGE RATES
"In order to maintain the existing exchange rate, the People's Bank of China had been accumulating very significant quantities of U.S. dollars as they are reporting currently, and that does suggest that the monetary, that a monetary expansion which occurs as a consequence of building up their monetary base by the accumulation of dollars is creating a significant growth in money supply, which over the long run they will have to address."
ON FISCAL DEFICITS
QUESTION: ... Do deficits not matter anymore?
GREENSPAN: "No, on the contrary, it matters a great deal.
"Congressman, I haven't changed my views since I was here in April on this issue... And indeed the budgetary process... I argued as best I could for a restoration of some semblance of fiscal responsibility. And I trust that the most recent numbers will push more and more of the government in the direction of getting a far more stable long-term fiscal outlook."
Transcript provided by FDCH Washington Transcript Service.
ON GROWTH PROSPECTS
"It is certainly the case that confronted with a period of low inflation and low risk premiums and quite favorable financial conditions, that we could very well be embarking on a period of extended growth, especially when, as I indicated in earlier testimony, it appeared as though the sharp market declines and decline in economic activity in the year 2000 and into 2001 largely reflected a break in a pattern of capital investment expansion which have not been completed."
"So if we can ever return to a state of business confidence, there is, in my judgment as I've indicated previously, a fairly substantial backlog of unexploited, profitable investment opportunities in the capital goods markets."
ON THE BACK-UP IN BOND YIELDS:
"Well, we clearly expected that, because you may recall just prior to that (June FOMC) meeting there was a expected probability, as reflected in the federal funds futures market, of a fairly good chance of a 50 basis point cut rather than the one we chose, namely 25 basis points. So we clearly expected that the markets would adjust."
ON RAISING RATES
"Well, if the recovery is indeed fragile, as you imply, I would suggest to you it is unlikely that we would be moving rates. As I indicated in my prepared testimony, we would seek significant improvement in the performance from what we currently see before that is even on the table."
ON JOBS AND PRODUCTIVITY
"If, and as we strongly expect, that the growth rate will be picking up in the months ahead and rising above the relevant rate of productivity, then clearly increased work forces will be required to meet the increased growth. That's our forecast, that's what I expect to happen, and, indeed, what I think the vast majority of economists examining the American economy expect to happen."
ON CHINA'S EXCHANGE RATES
"In order to maintain the existing exchange rate, the People's Bank of China had been accumulating very significant quantities of U.S. dollars as they are reporting currently, and that does suggest that the monetary, that a monetary expansion which occurs as a consequence of building up their monetary base by the accumulation of dollars is creating a significant growth in money supply, which over the long run they will have to address."
ON FISCAL DEFICITS
QUESTION: ... Do deficits not matter anymore?
GREENSPAN: "No, on the contrary, it matters a great deal.
"Congressman, I haven't changed my views since I was here in April on this issue... And indeed the budgetary process... I argued as best I could for a restoration of some semblance of fiscal responsibility. And I trust that the most recent numbers will push more and more of the government in the direction of getting a far more stable long-term fiscal outlook."