US consumers are underpinning the economy's recovery and aren't retrenching in response to concern over falling stocks and corporate accounting scandals, Federal Reserve Chairman Alan Greenspan said.
"It is certainly the case that the surveys of consumer confidence have gone down," Greenspan told the House Financial Services Committee. Consumer spending hasn't, he said. "Our interest is actually what people do, not what they say."
Fed officials expect the economy to expand by as much as 3.75 percent this year, Greenspan said. That's faster than the 2.5 percent to 3 percent foreseen in February, and a sign the economy is weathering the drop in stocks, he said.
"All the evidence we've been able to accumulate in recent weeks suggests that the economy is improving," he said in the second of two days of testimony on the economy and monetary policy. The accounting system "is frayed, but it is not broken."
In recent weeks, questions about corporate governance have hurt stocks, and that threatens to undermine spending by consumers and businesses, Greenspan said.
Consumers may react "for some time to the declines that have occurred in equity prices," he said. The "potential for additional revelations of corporate malfeasance" may also slow the expansion, and terrorism remains a threat, he said.
For now, there's no sign that eroded confidence has cut into spending, Greenspan said. "We're seeing in the retail markets, especially motor vehicles, evidence that the consumer has not retrenched in any material way," he said.
Eight companies in the S&P 500, including Xerox Corp, so far have announced plans to restate results for 2001, and more may do so, he said.
"If we get a lot of restatements, and I presume we may very well, I'm not sure that's all bad," Greenspan said. "What they're suggesting is the issue which gripped everyone for a number of years, to manage your earnings so you could affect your stock price, is going to disappear."
Tame inflation and concern that the recovery is fragile have led central bankers to refrain from increasing interest rates "to allow the strong fundamentals to show through more fully," Greenspan said, suggesting policy makers are unlikely to raise rates any time soon. The Fed's benchmark overnight rate stands at a four-decade low of 1.75 percent.
"Overall there are always elements in a complex economy such as ours which suggest things are not going straight up," Greenspan said. "They are not and I hope they all don't," because that would mean the economy was "out of balance," he said. "We're poised for a reasonably good expansion."
BACK IN THE NEIGHBORHOOD: The planned transit by the ‘Baden-Wuerttemberg’ and the ‘Frankfurt am Main’ would be the German Navy’s first passage since 2002 Two German warships are set to pass through the Taiwan Strait in the middle of this month, becoming the first German naval vessels to do so in 22 years, Der Spiegel reported on Saturday. Reuters last month reported that the warships, the frigate Baden-Wuerttemberg and the replenishment ship Frankfurt am Main, were awaiting orders from Berlin to sail the Strait, prompting a rebuke to Germany from Beijing. Der Spiegel cited unspecified sources as saying Beijing would not be formally notified of the German ships’ passage to emphasize that Berlin views the trip as normal. The German Federal Ministry of Defense declined to comment. While
‘UPHOLDING PEACE’: Taiwan’s foreign minister thanked the US Congress for using a ‘creative and effective way’ to deter Chinese military aggression toward the nation The US House of Representatives on Monday passed the Taiwan Conflict Deterrence Act, aimed at deterring Chinese aggression toward Taiwan by threatening to publish information about Chinese Communist Party (CCP) officials’ “illicit” financial assets if Beijing were to attack. The act would also “restrict financial services for certain immediate family of such officials,” the text of the legislation says. The bill was introduced in January last year by US representatives French Hill and Brad Sherman. After remarks from several members, it passed unanimously. “If China chooses to attack the free people of Taiwan, [the bill] requires the Treasury secretary to publish the illicit
A senior US military official yesterday warned his Chinese counterpart against Beijing’s “dangerous” moves in the South China Sea during the first talks of their kind between the commanders. Washington and Beijing remain at odds on issues from trade to the status of Taiwan and China’s increasingly assertive approach in disputed maritime regions, but they have sought to re-establish regular military-to-military talks in a bid to prevent flashpoint disputes from spinning out of control. Samuel Paparo, commander of the US Indo-Pacific Command, and Wu Yanan (吳亞男), head of the People’s Liberation Army (PLA) Southern Theater Command, talked via videoconference. Paparo “underscored the importance
The US House of Representatives yesterday unanimously passed the Taiwan Conflict Deterrence Act, which aims to disincentivize Chinese aggression toward Taiwan by cutting Chinese leaders and their family members off from the US financial system if Beijing acts against Taiwan. The bipartisan bill, which would also publish the assets of top Chinese leaders, was cosponsored by Republican US Representative French Hill, Democratic US Representative Brad Sherman and seven others. If the US president determines that a threat against Taiwan exists, the bill would require the US Department of the Treasury to report to Congress on funds held by certain members of the
RSS