the former fed chairman was asked about these cuts and whether or not they would do anything greenspan sequester cuts won't be horrendous for economy he says the crucial issue is how the sequester influences the stock market because the stock market is the really key player in the game of economic growth at the moment he says the data show that the stock prices are not only a leading indicator of economic activity they are major cause of a pacemaker is connected to the dow jones so unless the dow jones keeps going up greenspan is going to kill over and die is an important thing to realize that this is his thinking he says. prices cause activity cause economic activity and that the reason is the wealth effect of the stock market he says which has risen to five year highs and it explains why the consumer has been able to overcome various headwinds such as the payroll tax increase so the price rises are a looser real they're fake they can evaporate we've seen that happen the tax increases are real they take your real wealth your real savings your real money and transfer it to basically wa

pacemaker is connected to the dow jones so unless the dow jones keeps going up greenspan is going to kill over and die is an important thing to realize that this is his thinking he says that. prices cause activity cause economic activity and that the reason is the wealth effect of the stock market he says which has risen to five year highs and it explains why the consumer has been able to overcome various headwinds such as the payroll tax increase so the price rises are a looser they're not real their faith they can evaporate we've seen that happen the tax increases are real they take your real wealth your real savings your real money and transfer it to basically wall street well i mean a great example of that would be a company like corrections going to america the biggest largest prison operator in america the stock price goes up according to greenspan that's great the fact the deal with municipalities around the world to put ninety eight percent occupancy rate in their jails and you rounding up people and prosecuting them and in jailing them just by the needs of that stock price n

what could new fed chairman alan greenspan do to revive the patient?ing the 1970s and '80s, the federal reserve adopted long-term policies to halt inflation and ease unemployment. but what would the fed do in an economic emergency? monetary policy -- how well does it work? that's the question economic analyst richard gill and i will investigate on this edition of "economics usa." i'm david schoumacher. the federal reserve board is responsible for deciding how much money the economy needs to grow. in the early 1970s, the fed held to a policy of using the money supply to try to keep the economy on course. in times of inflation, the fed tightened the money supply to squeeze excess dollars out of the economy. in times of recession, it increased the money supply to stimulate growth. but in 1975, the fed, under the chairmanship of arthur burns, faced a new and troubling dilemma -- caught between persistent inflation and a growing recession, how did chairman burns keep the economy on course? by late 1974, inflation had become a serious economic problem. under

and the former chairman of the federal reserve, allen greenspan.weigh in. >>> tonight we have examined where the economy is growing and where headwinds remain. but let's shift to the bigger picture and explore what the long-term significant obstacles could be to america's economic privacy and prosperity. four challenges we face. challenge number one, health care. we will spend $2.8 trillion on it this year. that's about 1 out of every $6 the u.s. can economy will generate. we pay more for health care than the next ten biggest spenders combined. and we don'tç get better resul. we have higher rates of disease and injury for every age up to 75 and shorter life spans than any of 17 other wealthy nations. we rank 50th in the world in infant mortality. according to "time" magazine, cuba is number 41. >> we have to do something about health care costs. that is the main driver. but it doesn't really mean cutting benefits. that means cutting costs. >> reporter: bottom line, even though health care creates jobs, an expected 5.5 million this decade, what we

>> well, we are using alan greenspan to talk about the market. i am sure he appreciates it. >> well, it is a dramatic move upwards, but it is not a crash, but consolidation. >> we are down 30 points today, but it does not count. >> it does not count and talking about a 4% or 5% pullback in consolidation. >> we had it in february in the 3% decline in february. and that is the pullback right now. >> and that took a day and a half, right? >> yes, here is the thing, up 11% on the year so far and tyler hit it right if we end the year up 11%, and would you be disappointed if we ended the year up 11%? >> i would be fine here. >> and that is -- >> i have the people who are pulling money and they feel like 11% is good, and they are banking the money elsewhere, because they are good for the clients now. >> the average hedge fund in the first three quarters of the year is up 4.9% which is half of the s&p and most of the big, and this is long term, and most of the hedge funds are underp underperforming and end of the quarter, you will see more performance. >

alan greenspan. we're going to find out if he sees any similarities between today's environment and the situation back in 1996. the last time we had this kind of run when he gave his now famous irrational exuberance speech. andrew, first, give us more of the morning's top stories. >> before we do that -- >> jerry mcguire is an incredible statistic. i feel like we're jinxing these guys. the dow is now looking for its 11th straight day of gains, its 11th consecutive friday of gains. it hasn't been down any day in march or any friday of the year. guys, i feel like we're starting to jinx it at this time. it is the ides of march. >> we are going into st. patrick's day. >> andrew did not. >> neither did you. >> whoa. >> i've slipped right into joe's role. i poofed my head this morning. >> it looks good. he would be proud. >>> let's talk about another couple of corporate headlines this morning, including boeing. anyway, here it is. boeing says it is confident it could have its grounded 787 dreamliner jets f

i spoke with form early fed chairman alan greenspan. he said with respect to the sequestered, rising asset prices both in stocks and housing may in part overset the otherwise dill tear just effects of the federal spending cuts. are you in that camp at all? >> not especially. there's a little bit coming from stocks but the main thing is housing is coming back. we've bit very few house force a long time. household debt is coming down relative to income. balance sheets are in better shape. we have in a way, we've been down so long there's no place to go but up, so the private sector is starting to recover. >> the economy is, you seem to characterize it as luke warm. why are stock prices as high as they are today and do you think they can move up from these levels? >> two things. the economy is luke warm, profits have done very, very well. we've had for whatever reason, a major shift of income away from labor to capital. profits are very high. the other thing is interest rates are still very low, so money has to go some place and it bids up

>> greenspan, 90% believed from it. and then every now and then he would surprise you by saying the housing market is showing some speculative frenzy. wloops. >> rose: or irraise exuberance. >> or irrational exuberance, actually earlier. but still, and then bernanke has inherited a more completely academic view that the markets are pretty efficient. >> let me talk about you again. japan, you saw the bubble in japan. >> yes, the japan. >> rose: you call that the mother of all -- >> japan, you know the old story, the land underneath the peferp errors palace was worth more than the state of california. we spent a couple of days researching that. it really was worth more than the state of california. i mean how ridiculous can you get. >> rose: that was the price of land in tokyo. >> in tokyo, under the em errors palace. and that was the biggest bubble in the history of the world. that was much worse than the south sea bubble or chile bubble. and right behind it was the japanese stock market bubble. >> rose: right. >> that d

. >>> former federal reserve chairman alan greenspan told cnbc today he thinks the problem of getting too big to fail is getting worse, not better. one reason as he explained to me in an interview for "nbr" this morning is the structural flaws he sees in in the dodd/frank reform laws. i begin my conversation with the man who coined the phrase "irrational exuberance" in 1996, by asking whether we're anywhere close to that giddy spirit right now. >> nowhere close. the characteristics of what has been going on recently are actually more related to the removal of various types of what we call major areas of uncertainty, and the so-called tail risk, meaning the risks that are very unlikely to happen. but if they do, they have a very large impact. europe has been hanging over the american markets now for quite a while. and the removal of that risk, at least temporarily, i think it is only temporary, has enabled the underlying forces of the market to begin to come into vision. and what those forces are, are the deep-seated exceptional discounting that is going on of stocks to a point where s

scott, a record not seen since the days of alan greenspan. >> yeah, it's been a while since his nameame up in the news. good morning, greenspan, you'll remember was the chairman of the federal reserve before ben bernanke. he was also famous for a speech he gave warning investors of what he called irrational exuberance. now, irrational exuberance has become famous in the financial world. and here's something that should give you pause. he said that back in late 1996 when the markets were on exactly the same winning streak as they are today. the dow has closed higher ten days in a row. it's looking as if that streak may end today. it's a volatile day on the markets. they call it quadruple witching. this is when various options contracts close, but it is possible we could set an 11-day record. the last few closes on the dow have been just barely positive. you know, two points and five points. so not impossible that this afternoon we'll see another record high. back to you. >> we'll take all those little increments as we can get them. >> exciting news there. meteorologist christina loren

greenspan says stocks are cheap. do you agree? if so, what do you do? >> i don't agree outright cheap. if i were fed chairman in the late 90s, i might have a different threshold for what i consider cheap. stocks are cheap relative to a lot of other stuff that everyone thinks is very expensive. does that mean they're cheap? i'm not sure. when i see yields below 6%, that's expensive. i do not think valuation is the thing that would stop the rally. i don't think it's the reason to buy in. it's in that zone where the market can do what it's going to do because of other forces. >> bottom line, you have to be a stock picker. you can't make a blanket statement that everything is cheap, you have to be selective within the groups that you like, correct? >> you do. objectively if you look at the way this market has behaved, it's been healthy the way groups have shared the lead and it hasn't been one concentrated -- seven out of ten s&p sectors count for more than 10% of the index. that's broader based. i don't think it's one area and make or break for the market.

yes, we would have had a correction but healthy and necessary, and driven by the fact greenspan wanted to go out note -- out a hero not understanding the motivation. [laughter] they have their own personal agenda and he wanted to step on the gas and they could not pull it back in. it was exponential. >> having stepped on the gas previous times had made him a hero. >> i just want to highlight what i would call crony stated some verses capitalism but that means banks pay attention to regulators they and what customers think that is a sad change and not beneficial for the average consumer a cost of the offering that it's lost. >> i would echo that point*. died trying really changes the nature where banks looked. before dodd frankly with book to the customer for prices are products now they look to the bureaucracy. they're all waiting to see with the consumer bureau would do with qualified mortgages that identified help they could interact with customers. the serious problem, a dodd/frank is so much power to the federal reserve i fear it has turned it into another political player in washi

and then there's alan greenspan.s what alan greenspan said about the market earlier today. >> right now by historical calculation we are significantly undervalued. the reason yet stock market has not been significantly higher is there are other factors compressing it lower and irrational exuberance is the last term i would use to characterize it at this moment. >> '96. >> i remember when he said it when it went up into the 1,000 points like that it would be an ironic book everyonend if this says the opposite. >> that would be something, wouldn't it? >> you call the top like you call the bottom there, but i just -- i think that this is a market where people are saying i can buy bank of america. it used to be at 50 and now it's a 12 and before the mortgage pushbacks and i'm using bank of america and best buy because these are not the highest quality. they're not best in class. hewlett-packard has a bit underneath it and what that says to me is give me something that was down a lot that i haven't really missed. when i s

i pulled that from the producer. >> it's not the hard economics that a ben bernanke has or alan greenspanse are guys that, you know, and coming up with series, and -- it's larry mcdonald pes liz: larry can tweet you. tweet me, larry. >> in any event, it's not quite that, and i'll tell you, andy gave us that information, and that put us on a lower rung, and does he go into the private sector? i think yes, and i tell you now, larry fink at black rock put dibs in, whether he takes it or not, i can't tell you. liz: your phone will ring from people saying we are putting it in for geithner. >> that's funny you mention that because a couple months ago when geithner announced he was stepping down thought he would go to citigroup, and chairman there might be a place to go, but he's close with larry, they work together well in the past, geithner head of the new york fed, and larry involved in the bailout stuff. liz: at citigroup, and the commerce secretary. >> a little different, though. liz: and the ceo of kelloggs. >> a little different. he's nice enough guy. liz: charlie's mad at me because i'm

this is the maestro, alan greenspan. and i just say that to say, if he misses it that bad, maybe mr. bernanke would miss it. actually, the "wall street journal" documented when mr. bernanke was advising alan greenspan, the federal reserve chairman, about the bank mortgage situation in the mid-2000, 2003, 2004, 2005, he was advising mr. greenspan to keep pouring the low money out, keep encouraging banks to lend, lend, lend. and he rejected the idea that we were in danger and then, whammo, we had this fabulous -- this horrible recession of 2007. so i just would say, this chart shows us that we need to get our house in order. and the american people know that. they tell me that everywhere i go. and why won't congress respond? the house has responded. i know my democratic friends don't like to hear that, but this budget that paul ryan produced, it's not a perfect document but it changes the debt course of america, it balances a budget. we could do the same thing. if we wanted to do it a different way, let us do it a differen

listen to what alan greenspan said friday. >> europe has been hanging over the american markets for quite a while. the removal of that risk, i think temporarily, i think it is only temporary, has enabled the underlying forces of the market to begin to come into vision. >> and today, the clearer vision that greenspan referred to was clouded the cyprus, we have the report by cyprus matters. >> reporter: cyprus is a smaller island with a smaller economy. but now they're hi

listen to what alan greenspan said friday. >> europe has been hanging over the american markets for quite a while. the removal of that risk, i think temporarily, i think it is only temporary, has enabled the underlying forces of the market to begin to come into vision. >> and today, the clearer vision that greenspan referred to was clouded the cyprus, we have the report by cyprus matters. >> reporter: cyprus is a smaller island with a smaller economy. but now the

what struck me about greenspan's comments there is the penetration. the penetration of home ownership is still down. and it's growing, but we're still talking about a pretty good deficit there. what's going on with it? why is the penetration rate still low? >> well, two things, really. for anybody who's a parent of kids that are just out of college, they know a lot of them speaking on couches and -- >> or they move back with you. >> exactly. household formation rates is what economists would call it. but basically, we haven't had as many households forming. there's a big potential for a jump in the coming years in that, but we haven't seen it accelerate enough. as job growth continues, that will happen. the other issue has been credit availability. and we've seen some signs that it's easing, but we need to do more. that's why the president has said, we ought to help more families refinance. millions of homeowners still underwater, who could spend $3,000 more a year, boost consumer spending, if they could save on their mortgages, but we need to acceler

people criticized greenspan for the '90s. >> you're right.gressive than anything we've seen and warren buffett warned about it yesterday, and he's right. there could be some disruption when it's time to exit, and that's why the fed is having these debates in their closed door meetings, although they are public, about how we're going to exit this, because they are going to need to start thinking about it because what they don't want is rates to start spiking up. they are long treasuries, and could incur a big long and they don't want to disrupt it. >> could it happen another way though? don't you think at some point when he signals, you know, rates are going to start moving, they will start moving fast? >> i think the most important thing the fed needs do is on these asset purchases, start winding those down first so they can keep low rates for an extended period of time and where they can get caught is on the asset purchases, if they don't liquidate those in a slow, methot call way, and i'm sure they are debating that there. >> can't wait to

catch up they're convinced that central banks if it's ok if you like they got their back you have to greenspan put years ago you've now got the bernanke you put maybe you know. coming in next week we're going to have the kuroda put in japan japan's up over twenty percent this year these things will always end up being overextended people start to think of reasons why these things should be trading or where the trading it will be unrealistic expectations. traders will come in and say hey we we can't fight the tape so you know and i think we're setting ourselves up for a classic overshoot to pull back situation in markets this year and let's see how the equity markets are finishing this week on wall street where trade is in full swing we're actually seeing a correction on friday the dow and the nasdaq are shedding around a quarter percent each and now it's on a lower than expected consumer confidence data for march over in europe equities given to the pressure ending the day with losses of point six percent for the footsie and a less than a quarter percent for the japs same old worries about the

and we'll get alan greenspan's views on the economy right now. first here's a look at the international markets and how they did today. >>> a big night in the big apple for samsung tonight. it's expected to launch its newest smartphone, the galaxy s4. the company rented radio city music hall for the unveiling. samsung hopes it will help it gain share over apple's popular iphone. apple is still number one with 34% share. samsung has 19%. joining us with more, dennis berman from "the wall street journal." dennis, a lot of hype for this new samsung phone. what's new? what are the bells and whistles? >> of course, the hype -- it's supposed to be unveiled at radio city music hall. they chose a pretty cool venue for it. they're not saying precisely, but there have been some things that leaked out their business speculation. one of the possibilities is perhaps that the phone follows your eye. so as you look at your phone or looking down at an imaginary phone, it knows as your eye moves, and it perhaps adjust its web browser or do a number of other funct

let me ask you, though, are we now into the irrational exuberance zone that alan greenspan warned about years ago? > > you know, there are a couple ways to look at this. some folks are saying - and this is the truth - that a lot of retail investors haven't yet gotten into this market yet, they are still reluctant. and if you buy that and you believe that retail investors are now going to storm in and push this market higher, then we aren't irrational yet. but at the same time, you have to realize investors - not just u.s., but around the world - have been putting a lot of money into equities, obviously, as we hit multi-year highs now and the dow eclipses its 2007 highs. but i am sort of caught in the middle. i think right now, what we have to look at is earnings. i think there are a good amount of stocks that have reached irrational exuberance levels, but there are another group that is still of value, and that is where you want to focus your energy. > it is funny when you contrast this with what is going on in the rest of the economy - jobs are weak, we don't have strong growth right n

temperance as to irrational exuberance which was the phrase in 1996, all the way back to chairman greenspan when he asked the question. i said we're at a six on a scale of one to ten in terms of exuberan exuberance. that simply means that as stock prices move higher and risk spreads are compressed in terms of bond markets b that we shoul begin to be cautious. don't look for an exit but temper your enthusiasm with lower expectations and then perhaps a more diversified and lower risk portfolio. >> bill, we know we can always count on an exuberant conversation with you, have a great weekend. bill gross, founder and co-investment officer at pimco. >>> and the american recovery we examine where the economy is growing and where headwinds remain. in tonight's final installment on this day of positive news about jobs we shift to the bigger picture and explore what the long-term obstacles are to america's economic primacy and prosp prosperity. "in focus on this friday, american recovery and the challenges we face. challenge number one, health care. we will spend 2.8 trillion on it this year, that's

. > i want to back up just a minute, though, to friday, and on friday alan greenspan was talking about the fact that he believes there is no irrational exuberance to stocks right now on cnbc. was that a buy signal, a sell signal, or no signal at all? > > i think it was a continuation of the existing buy signal for the most part. clearly this market has been establishing areas of value to the upside. one thing that traders need to be aware of is the fact that when a market moves from point a to point b, it doesn't go in a straight line, it pauses, and kind of regains strength if you will, or regains momentum, and those areas of pause are considered to be areas of value where the market trades sideways before it develops again vertically. in this case, it has been upside vertical development. anybody who is short this market is trading an opinion, not the market. the market clearly has been establishing areas of value to the upside, and until that changes, basically you are trading opinions. > what do you see in the week ahead? i know we have a fed meeting coming up. > > i think all eyes

this was the greenspan commission. want to read a little excerpt of an account of how that came about. mr. greenspan, foal commissioners, met for month, secretly deadlocked. one late afternoon pat moynihan, democratic senator across new york spoke to bob dole, republican of kansas, they cut the deal and brought it out right there. fed it to mr. greenspan and left the details to his commission. last-minute republicans and democrats locked arms around to plan save social security. that's something like what we are looking for. we want the legislators to strike a deal. let's all remember what came out of that. this is the percent of workers that pay more payroll tax than by income levels. >> payroll tax than income tax. >> exactly. the reason that that deal was amenable was because it is deeply regressive tax on working people. a way they solve the problem. i just -- i worry when -- if we are talking about a grand bargain it is like -- well, who is -- who going to end up paying for the grand bargain and that, to me, i'm n

friend he's a professor of economics and so the message methodist university he's the author of greenspan's fraud which is a brilliant book and he also wrote a book called the new golden age and in that book what he suggests is we're going experience this horrible crash and publish a book like four or five years ago he's been a regular on a radio show for years and published this book for five years ago saying there's going to be a horrible crash and what's going to come out of it is the same thing that happened of the crash of one thousand nine hundred twenty nine to thirty three period which is a new f.d.r. kind of character that's going to a new golden age we're going to reach member all those things that we forgot and you know a lot of that is going to come a good time and we'll start putting the banks toure's in jail and we'll start have and i think frankly that's going to happen i think it's going to get so bad people are going to realize how who caused it how god caused it and we're going to fix it mike in gold ontario my saying that right. you know it's well hey mike what i. just wa

in this case alan greenspan make a bad mistake but he wanted to go out a hero. he created negative real interest rates come which is a huge incentive for people to buy her when house prices are appreciating. bernanke created a yield curve, which the banking business was by short and one long had negative spread, a whopping incentive for one of the reasons stubble and exponential to last for years. the context in which these mistakes we made really federal reserve policy on the cover effective the housing market because of policy, specifically freddie mac and fannie mae overinvestment housing is particularly to start it and that's why it unusually big bubble pushed further but also very striking because housing is consumption. you can see my house so we incentive a massive overconsumption, analogous in agriculture just one reason we had a hard time getting the production crisis going again and which have millions of people to build houses, the mortgage bankers and learn new jobs so housing investment in the context of federal reserve monetary policy is particular