Greenspan: higher stock prices are the answer

Greenspan: Stock Rally Means Lower Stimulus Need
The biggest stock market advance in seven decades is reducing the need for additional government stimulus measures, according to former Federal Reserve Chairman Alan Greenspan.
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“All of the statistical evidence indicates that the level of household wealth is a major factor in consumer expenditures and indeed apparently finances directly and indirectly about 15 percent of consumer outlays,” Greenspan said. “The impact on consumption expenditures is significant, largely because the amount of wealth is five times the level of income.”

Greenspan ran the central bank from 1987 to 2006, a period in which the S&P 500 climbed more than sixfold, including dividends, according to data compiled by Bloomberg. He reduced interest rates to a half-century low of 1 percent in 2003 and didn’t raise them for a year, helping spur a 16 percent gain in home prices in 2004 and setting the stage for a housing-market collapse that led to more than $1.7 trillion in global bank losses and writedowns.