Washington, D.C., October 12, 2005--Federal Reserve Chairman Alan Greenspan said on Wednesday the ability of the U.S. economy to weather shocks showed the benefits of flexibility, even if this performance also encouraged "speculative excess."
"Although the business cycle has not disappeared, flexibility has made the economy more resilient to shocks and more stable overall during the past couple of decades," Greenspan told the National Italian American Foundation. The text of his speech was made available in advance to the media.
"To be sure, that stability, by fostering speculative excesses, has created some new challenges for policymakers.
"But more fundamentally, an environment of greater economic stability has been key to the impressive growth in the standards of living and economic welfare so evident in the United States," he said.
Most of the speech repeated remarks he made on September 27. But Greenspan did make some fresh comments on the risks of protectionism, raising the issue in the context of labor market flexibility, which he noted was "regrettably" associated with job insecurity despite his view it in fact helped create work.
"Protectionism in all its guises, both domestic and international, does not contribute to the welfare of American workers. At best, it is a short-term fix at a cost of lower standards of living for the nation as a whole," he said.
