July 31, 2008 / 7:52 PM / 11 years ago

Global slowdown may put U.S. in recession: Greenspan

Former U.S. Federal Reserve chairman Alan Greenspan speaks at the Per Jacobsson Foundation Lecture on the "Balance of Payments Imbalances" at the International Financial Corporation in Washington October 21, 2007. REUTERS/Yuri Gripas

WASHINGTON (Reuters) - Former Federal Reserve Chairman Alan Greenspan said on Thursday that a slowing global economy may push the United States into recession, though it is not yet in one.

“I think the data at this stage in the United States are not ... suggesting recession,” Greenspan said in an interview on CNBC television. But he added: “We’re right on the brink and I would be more surprised if we didn’t (have a recession) than if we did, given the financial state.”

Greenspan said companies were controlling inventories effectively and that “at this stage, I think they are the major reason why in the very short term we’re fending off inflationary pressures.”

However, he noted that with jobless claims rising and growth overseas slowing, it would be hard for the United States to avoid slipping into recession.

Greenspan also said the government had no choice other than to broker the emergency sale of failing investment bank Bear Stearns, but the Treasury Department, not the Fed, should have backed the transaction.

“That is a fiscal policy operation — essentially something that should have been set up in the Treasury Department,” Greenspan said in an interview on CNBC television.

“What we should not do is have the central bank involved in its balance sheet,” he said, adding:

“That balance sheet is the creator of the monetary base and if you allow major fluctuations in that base as a result of other-than-monetary-policy reasons, I think you’re taking undue risks with the notion of the stability of the financial system and very specifically the Fed’s control of inflation.”

Reporting by Glenn Somerville and Mark Felsenthal; Editing by James Dalgleish

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