The country’s ability to weather a surge in energy prices is the latest example of how economic flexibility helps prevent serious recessions, Federal Reserve Chairman Alan Greenspan said Wednesday.
Greenspan said an environment of maximum competition has been the driving force in spurring the type of flexibility that has allowed the country to withstand a number of shocks over the past two decades with only two mild recessions.
“The impressive performance of the U.S. economy over the past couple of decades, despite shocks that in the past would have produced marked economic contractions, offers the clearest evidence of the benefits of increased market flexibility,” Greenspan said in remarks to the National Italian American Foundation.
Wall Street investors have given Greenspan credit for the economy’s good performance during this time period for his skillful handling of a number of economic shocks, from the stock market crash of October 1987, just a few months after Greenspan took office, to the rate cuts he engineered during the height of the Asian currency crisis in 1998.
While Greenspan mentioned these events in his speech, he ascribed the economy’s ability to avoid steep recessions to overall market flexibility rather than good policies at the Federal Reserve.
“Most recently, the flexibility of our market-driven economy has allowed us, thus far, to weather reasonably well the steep rise in spot and futures prices for oil and natural gas that we have experienced over the past two years,” Greenspan said.