Greenspan: GDP to decline significantly

TORONTO -- Former Federal Reserve chairman Alan Greenspan said Friday there is no doubt the U.S. and world economy are in a very severe recession and that U.S. gross domestic product will decline significantly in the fourth quarter.

Greenspan said the U.S. and world economy are not quite in a free fall but something close to it.

Greenspan made the comments at a business lunch in Toronto.

"That we are in a recession, very severe, there's no question," Greenspan said. "Gross domestic product in the United States in the fourth quarter is going to be down significantly."

Greenspan said the early GDP data for October is bad. He said monthly GDP is sliding at over a 3% annual rate and that the early October data suggests it is even worse than that.

"We know we are going down and there's very little we can do about that," Greenspan said.

Greenspan said U.S. home prices and stock prices are critical. He said U.S. housing values might have another 5% to 10% to decline before they bottom out and said that could happen sometime in the first half of next year.

"It's important to recognize we are not in quite a free fall but something close to it," Greenspan said. "This economy and indeed the world economy has tilted over and is moving down fairly aggressively pretty much across the board."