This is an interesting article I found on Focus Publications....
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| Volume 12, Issue 38 | For the week of October 13, 2008 |
| A POSITIVE NOTE FROM A CREDIBLE SOURCE |
| There is a throng of under qualified prognosticators all too willing to give their two cents on how the economy is really doing and when housing will begin a recovery. Some have placed partial blame of the current economic crisis on Alan Greenspan's Fed reign having kept interest rates too low too long. Whatever your view of the Greenspan years might be, his analysis of the economy has been pretty much on target. | |
| Here is his most recent offering on the future of housing: In an article recently written for Emerging Markets magazine, Alan Greenspan wrote that the U.S. housing market will begin recovery in the first half of 2009. |
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| Greenspan sees the slowing rate of decline in U.S. home prices as the first positive move to be followed by the frozen credit markets thawing "as frightened investors take tentative steps towards reengagement with risk." "More conclusive signs of pending home price stability are likely to become visible in the first half of 2009." | |
| He believes that once the housing market regains its footing, markets will address the credit crisis. He said the question is "How much overall deleveraging is going to be required to induce global investors to again become committed holders, at modest interest rates, of the liabilities of the world's financial intermediaries?" | |
| Another unknown is the amount of additional bank capital required to stabilize the financial system. | |
| A technical measure of bank capital reaching the necessary level is when the U.S. dollar Libor/OIS spread drops from the current 300bp to the pre-crisis level of 15bp. |
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