Alan Greenspan compares financial situation 1987 crash
Published September 7th, 2007
Current financial turmoil is identical to that seen in earlier stock market crashes, Alan Greenspan has warned.
The ex-Federal Reserve boss compared today’s situation to the crash of 1987 and the fallout from the near-demise of Long-Term Capital Management in 1998.
Anxiety over a global credit squeeze triggered by the US housing slump was driven by “fear”, he said in a speech.
“The human race has never found a way to confront bubbles,” he said, alluding to booms suddenly grinding to a halt.
According to the Wall Street Journal, Mr Greenspan drew parallels in a speech in Washington with US financial panics down the years, driven either by a collapse in confidence in banks or land speculation turning sour.
The current turbulence is being driven by banks’ unwillingness to lend until the full extent of their exposure to the troubled sub-prime mortgage market becomes clear, a situation which threatens to hurt the US economy and spread to other countries.
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