WHERE: CNBC'S "SQUAWK BOX"
Following are excerpts from the unofficial transcript of a CNBC interview with Former Federal Reserve Chairman Dr. Alan Greenspan today on CNBC's "Squawk Box." All references must be sourced to CNBC.
GREENSPAN ON OIL:
"One thing that economists have been bedeviled by over the years is that the correlation between oil prices on a global basis, and global economic activity is far more precise than any evidence we have that it should be, in short, as a leading indicator, global oil prices are a very useful statistic, the only problem is we don't know fully where all the channels are."
GREENSPAN ON MOMENTUM:
"My view is that when oil prices get up to this area and start to move up even higher, you do have to start to worry, but there is no question at this stage that the momentum of this economy, leaving out the oil price issue, leaving out the Euro problems that have emerged, and very specifically leaving out the budget problems, this economy is really beginning to pick up momentum."
GREENSPAN ON MOMENTUM:
"There is no question at this stage that the momentum of this economy, leaving out the oil price issue, leaving out the Euro problems that have emerged, and very specifically leaving out the budget problems, this economy is really beginning to pick up momentum."
GREENSPAN ON FORECAST:
"The fascinating issue for forecasters is how do you factor in all of the negatives because there are not sort of modest rises here, modest costs here, these are big stuff on both the debit and the credit side, and how its going to work is not all together clear-- but for the moment this economy is moving."
GREENSPAN ON CURRENCY:
"When you have two faulty currencies, and the euro and dollar are both faulty, but probably almost equally faulty, so that the exchange rate between the dollar and Euro is not really moving all that much."
"What the price of gold is saying, is that there elements within the marketplace that feel very uncomfortable with respect to what is going on generally, and its not an accident that you're finding that central banks are going in to buy gold and one of the reasons is gold is historically one of the rare media of exchange that doesn't require any collateral or backing, counter signatures, gold is universally acceptable as a means of payment."
GREENSPAN ON THE GOLD STANDARD:
"I'm not saying we can or should go back on the gold standard, that would be extremely difficult, and it would require such cast changes that this society has made no indication that it wants to do that, but I do think to get a sense of the stability of the system, watching the price of gold is not too bad."
GREENSPAN ON OIL PRICE:
"When we talk about the price that will hit us, keep an eye on brent and not on WTI, that has got technical problems."
"I am assuming, and this is an assumption, that the foreclosures will begin to slow down, they are beginning to slow down, but the problem that we've had is such a large proportion of sales are distressed sales, and clearly if you have a significant proportion in that category, the overall price level is going down."
GREENSPAN ON HOME PRICES:
"Ultimately what is the determinate, as far as I'm concerned, is basically whether or not the price, excluding distressed sales, is falling, because the other is a statistical problem, I'm not saying its not real, it is real, but it gives you a false signal, so I'm watching the less distressed sales, now I must admit those prices have edged down recently somewhat to my surprise. But not enough to create where I think the problem is."
GREENSPAN ON MORTGAGES:
"When subprime went underwater, they were very rapidly going into foreclosure because they couldn't basically live with it, but the vast majority of conventional conforming mortgages, even those which were underwater, are none the less capable of being financed by the people who live in the homes the proportion of conventional conforming homes that will be defaulted, is really very small."
GREENSPAN ON THE FED:
"At this point the Fed is in the position where it can contract its balance sheet very significantly and the issue is will they be able to do it in proper timing? They think they can."
GREENSPAN ON BERNANKE:
"These are judgments that you have to make, I know Bernanke very well, we worked together, Ben and I went over a number of crisises together, I know how he functions, I have considerable trust in his judgment."
GREENSPAN ON THE FUTURE:
"You're dealing with very difficult problems. The one thing we all pretend we can do but we can't, is forecast, the future out there isn't very bright."
"I look at whole series of mandates in Dodd/Frank and I think some of them are internally contradictory, and we're going to find out if that is indeed the case when the regulators start to implement."
GREENSPAN ON CONSEQUENCES:
"What we're going to find is that the unexpected consequences of much of the new regulation that's going to come as a result of Dodd/Frank is going to have to reversed, and that's going to create very high degrees of uncertainty."
GREENSPAN ON TOO BIG TO FAIL:
"The purpose of a financial system is to move the scarce savings of a society into physically productive assets, we in the United States have been very affective in doing that, poor savings but very high rates of return. You start moving some of that scarce savings to propping up companies, it does not go into effective uses, and the result is output per hour slows down and standards of living slow down. So too big to fail is critically an issue with respect to standards of living, you have to have failures, JOE (HAVE WE SOLVED IT?) no we have not."
GREENSPAN ON SAUDI OIL:
"Saudi Arabia is, look- its got three and a half million barrels of standby crude capacity, nobody else has standby capacity, so Saudi is a whole game."About CNBC:
CNBC is the recognized world leader in business news, providing real-time financial market coverage and business information to more than 340 million homes worldwide, including more than 95 million households in the United States and Canada. The network's Business Day programming (weekdays from 5:00 a.m.-7:00 p.m. ET) is produced at CNBC's headquarters in Englewood Cliffs, N.J., and also includes reports from CNBC news bureaus worldwide. Additionally, CNBC viewers can manage their individual investment portfolios and gain additional in-depth information from on-air reports by accessing http://www.cnbc.com.
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