One of the most influential figures in the world economy, former US central bank chairman Alan Greenspan, has warned that the good times are over for the world economy.Mr Greenspan, who played a key role in managing the US economy as head of the Federal Reserve from 1986 to 2006, says that higher interest rates and higher inflation are more likely in the future, leading to slower economic growth and lower housing and share prices.
In a wide-ranging interview with BBC economics editor Evan Davis, he warns that the UK cannot escape from global economic pressures.
And he says that central bank governors, including the Bank of England’s Mervyn King, face a far more difficult task in managing the economy in turbulent times.
Why is Mr Greenspan so gloomy for the world economy?
And why have his perceptions shifted so sharply, compared with his views when he was in charge of the Fed?
By Saskia Scholtes
Published: September 18 2007 23:54 | Last updated: September 18 2007 23:54
Large banks with big balance sheets and access to central bank liquidity could be poised to benefit from the recent turmoil in financial markets, says ratings agency Moody’s in a report on Wednesday.
As the crisis of confidence in credit has reduced access to cheap capital markets funding for non-bank participants such as hedge funds, the ratings agency argues that banks are set to play an increasingly important role as the much-needed distributors of central bank liquidity.
“Banks play a pivotal role, as they stand between the central bank and the rest of the financial system – the franchised distributors of the central bank’s vital product,” says Christopher Mahoney, vice-chairman at Moody’s.
The comment comes as international policymakers and regulators engage in increasingly heated debate over their response to the recent market turbulence, and whether banks should be granted a freer hand to allocate and distribute capital during times of stress.