NEW YORK (Reuters) - Former Federal Reserve Chairman Alan Greenspan said the current market turmoil is “identical” in many ways to that which occurred in 1987 and 1998, the Wall Street Journal reported in its online edition on Friday.
“The behavior in what we are observing in the last seven weeks is identical in many respects to what we saw in 1998, what we saw in the stock-market crash of 1987,” Greenspan was quoted by the newspaper as saying.
He made the comment on Thursday at an event in Washington organized by the Brookings Papers on Economic Activity, an academic journal, the report said.
Greenspan, now a consultant but who was Fed chairman from 1987 to 2005, said business expansions are driven by euphoria and contractions by fear, the report said.
While economists tend to think the same factors drive expansions and contractions, “the expansion phase of the economy is quite different, and fear as a driver, which is going on today, is far more potent than euphoria,” the report said.
Hedge fund Long-Term Capital Management controlled $100 billion of assets in 1998 but collapsed in the wake of a Russian debt crisis, wreaking havoc in many derivatives markets.