US is in recession, say Greenspan and Buffett news
05 May 2008

Allan Greenspan, former governor of the Federal Reserve and bilionnaire investor Warren Buffett believe the US is deeply in recession even as government data showed fewer job losses in April and a slight rise in real GDP growth in the last quarter of 2008.

The United States is in an "awfully pale recession" and the economy may remain stagnant for the rest of the year, agency reports quoted Greenspan as saying.

The US economy is stagnating and it would not start turning around until home prices settle and pressure on finance companies to write off mortgage-related losses eases, Greenspan said.

Greenspan had earlier also said of recession in the US, although he did not say  how deep or prolonged the downturn would be.

Voicing similar concerns, billionaire investor Warren Buffett said, ''The US is in recession as I define it,"  adding, "I would define that as a situation where people are doing less well than they were three months, six months or eight months earlier and most businesses find themselves in that position too.''

"If we're in a non-recession, I don't think people want to see it going in the same direction as it is and saying it's wonderful," he added.

Rising mortgage payments remain a critical problem, he said, as thousands of homeowners face higher outgoing amidst falling home prices.

Buffett said the government could help borrowers who were misled on what they would owe. Borrowers, he said, "shouldn't be penalised for being misled, but shouldn't be protected against mistakes."

Buffett's comments follow a 64 per cent drop in overall first-quarter profit at his investment and insurance firm Berkshire Hathaway.

Their views are not corroborated by the latest GDP numbers, that show a 0.6 per cent rise in real first quarter GDP growth and a slight fall in April jobs data, although a blip in the business process outsourcing sector points to such a possibility.

Last week, the US commerce department said the economy grew at 0.6 per cent in the first quarter. But Buffett said the nation's population also grew, making the real growth rate lower. He also said that, even if the data do not show the economy retracting, people feel as though it is.

The BPO slump has been attributed mainly to the US credit crunch, but the mortgage loan-related factors are expected to lead the US economy into a long-drawn recession.


 search domain-b
  go
 
US is in recession, say Greenspan and Buffett