Greenspan: This is the deepest crisis since 1930.

The global recession will undoubtedly be the longest and deepest since the 1930s, and much more government money will be needed to stabilize the American financial system, stated former Federal Reserve Chairman Alan Greenspan.

Despite his forecast regarding the current crisis, Greenspan emphasizes that such a rapid deterioration of the economic situation cannot last forever. He also reiterated that a necessary condition for ending the financial crisis is the recovery of the American real estate market. In the meantime, the stock markets are overwhelmed by a level of fear not seen since the early 20th century, Greenspan assesses. “By any historical comparison, it is certain that stocks in global markets are now cheap. However, history also tells us that they could be much cheaper before their prices turn around,” Greenspan stated at the Economic Club of New York.

Citing Japan’s experiences from the 1990s, Greenspan also conveyed that American authorities need to ensure the restoration of the financial system before the implementation of the economic stimulus package begins. “If we are not successful in this, the positive impact of fiscal stimulus will dry up once that package of measures is completed,” emphasizes Greenspan, adding that additional money will be needed to stabilize the American banking system and restore normal lending, alongside the already agreed program of the U.S. Department of the Treasury to assist banks.

And after signing the $787 billion stimulus law, which aims to create 3.5 million new jobs, U.S. President Barack Obama is taking on a new task. He wants to alleviate the problems of an increasing number of Americans with delayed mortgage repayments, which are at the core of this economic crisis. Obama emphasizes that his goal is to prevent millions of American families from losing their homes because they cannot meet their mortgage payments.

“We must prevent the spread of mortgage repayment problems and falling home prices, and do everything we can to help responsible homeowners stay in their homes,” Obama states. The ambitious plan includes government money to mortgage lenders to reduce their interest rates, thereby lowering the monthly loan payments for Americans facing repayment issues. It is still unknown what criteria will be used to allocate this assistance, and it is expected that between $50 billion and $100 billion could be set aside for this purpose. However, investors in global markets remain fearful of a deepening recession in the global economy. The MSCI World Stock Index was down 0.4 percent this morning, at 198.05 points.  (H)