the VOA Special English Economics Report.
estimates show that the United States economy shrank by three-tenths of one
percent from July through September. Economists had predicted a five-tenths
drop. But Thursday's report from the Commerce Department also showed that
Americans cut their spending by the most in almost thirty years.
economy has shrunk only one other time since the recession of two thousand one.
That was at the end of last year.
A recession is traditionally defined as
at least six months of decrease in the gross domestic product. G.D.P. is the
value of all goods and services produced within a country.
many central banks, fearing a worldwide recession, have cut interest rates. On
Wednesday, the Federal Reserve cut its target rate for overnight loans between
banks from one and a half percent to just one percent. The federal funds rate
has not been that low since June of two thousand four.
The Fed chairman then was Alan
Greenspan. Critics say his support of low-cost credit, plus his resistance to
stronger controls, helped inflate housing prices. He thought lenders understood
risk better than government regulators. But high-risk loans led to today's
credit crisis once the housing bubble burst.
week, the House Committee on Oversight and Government Reform called Alan
Greenspan to hearings on the financial crisis. Chairman Henry Waxman asked him
about his positions in the past on supervision of financial markets.
WAXMAN: "My question for you is simple. Where you wrong?"
ALAN GREENSPAN: "Partially. But let's separate this problem into its
Greenspan went on to defend some of the complex financial products called
derivatives. But he said there are "some serious problems" with
credit default swaps. Buyers use this kind of derivative as insurance against
losses on debts they are owed.
default swaps on debt related to risky home loans almost collapsed A.I.G. The
huge insurance company was rescued with government loans.
Waxman pushed Alan Greenspan for a more complete answer -- unlike the days when
he was treated like a financial god.
WAXMAN: "Well, where do you think you made a mistake?"
ALAN GREENSPAN: "I made a mistake in presuming that the self-interest of
organizations, specifically banks and others, were such as that they were best
capable of protecting their own shareholders."
confidence, a measure of how Americans feel about the world's largest economy,
is at its lowest in at least forty years.
that's the VOA Special English Economics Report, written by Mario Ritter. I'm Steve Ember.