Originally published September 23 2005
Greeenspan warns rising property costs could lead to stock market crash
by Mike Adams, the Health Ranger, NaturalNews Editor
When Federal Reserve Chairman Alan Greenspan warned American homebuyers that driving property prices any higher may lead to a stock market crash, The Times reported that share prices plummeted in response.
WALL STREET shuddered yesterday after Alan Greenspan, the United States' central banker, warned American homebuyers that they risk a crash if they continue to drive property prices higher.
He said that the US house-price spiral had become an economic imbalance, threatening stability like the country's trade gap or its budget deficit.
In a pre-retirement speech to fellow central bankers at Jackson Hole, Wyoming, Mr Greenspan said that people were investing in houses as if they were a one-way bet, not allowing for the risk of price falls.
The Federal Reserve Chairman's warning, his strongest yet, sent share prices falling on Wall Street, at one point knocking 66 points off the Dow Jones industrial average.
Traders said that Mr Greenspan's comments were reminiscent of his 1996 inveighing against "irrational exuberance" on the stock market, for fear that a crash there would hit consumers and push the economy into recession.
He fears that rate increases set in train as the economy recovered could throw the housing market into reverse and suggested that the twin deficits would now restrict his room to manoeuvre if a house price downturn hit spending.
Asset prices were, he complained, driving monetary policy more than ever before.
Share traders were also worried by an unexpectedly sharp fall in the University of Michigan consumer confidence index, a small but influential barometer, which fell for the first time in three months.
Rob Carnell, of ING Bank in London, said that Mr Greenspan's warning was an eerie reminder of a successful campaign last summer by Mervyn King, Governor of the Bank of England, to "use rhetoric rather than interest rates" to cool an overheating homes market.
On traditional tests, about a third of US local homes markets are now markedly overpriced.
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