Video: Greenspan on altering unemployment level

  1. Transcript of: Greenspan on altering unemployment level

    MR. GREGORY: Where do you see unemployment as we move through the rest of this year and beyond?

    MR. GREENSPAN: I feel we just stay where we are. The -- there is a gradual increase in unemployment, but not enough to reduce the level of unemployment.

    MR. GREGORY: We're at or about 10 percent.

    MR. GREENSPAN: Well, we're 9.5, and...

    MR. GREGORY: Right. But I'm saying, is that where we remain, do you think?

    MR. GREENSPAN: Yeah, yeah. I, I would say that there's nothing out there that I can see which will alter the, the, the trend or the level of unemployment in this context.

    MR. GREGORY: Interest rates , how long before they start coming up? Do they need to stay low?

    MR. GREENSPAN: Well, the problem there implies that the government has control over those rates, meaning the Federal Reserve and the Treasury Department , in a sense. There is no doubt that the federal funds rate , that is the rate produced by the Federal Reserve , can be fixed at whatever the Fed wants it to be, but which the government has no control over is long-term interest rates , and long-term interest rates are what make the economy move. And if this budget problem eventually merges to the point where it begins to become very toxic, it will be reflected in rising long-term interest rates , rising mortgage rates , lower housing. At the moment, there is no sign of that, basically because the financial system is broke and you cannot have inflation if financial system is not working.

Image: 'Meet the Press'
Stephen J Boitano  /  AP
Alan Greenspan says there's a "pause" in economic recovery, that feels like a "quasi-recession."
updated 8/1/2010 5:02:47 PM ET 2010-08-01T21:02:47

Former Federal Reserve Chairman Alan Greenspan says he thinks the economy is having a modest recovery, but right now there's a "pause" in that recovery, so it feels like a "quasi-recession."

Greenspan says long-term unemployment is pulling the economy apart even though large banks are doing much better and large companies are in excellent shape.

Greenspan predicts that unemployment will remain where it is, hovering around 9.5 percent, for the rest of the year.

Cheering the comeback of the stock market, Greenspan tells NBC's "Meet the Press" that a rising stock market will do more to stimulate the economy than any of the remedies now being discussed.

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