Federal Reserve Chairman Alan Greenspan, who has fretted for months that long term interest rates are too low, said Friday the U.S. central bank will keep a closer watch on the increasing value of assets. Greenspan, speaking in Wyoming, mentioned real estate as one of his concerns. Demand has pushed house prices up by 12.5 per cent over the year ending in March, the Office of Federal Housing Enterprise Oversight said in June, and economists are worried the bubble could burst, crushing economic recovery in the U.S. Greenspan said that investors are more willing to take risks as assets move up in value and low interest loans are available. He added that consumers feel that economic stability is reducing risk for them. While this has helped the economy because it increased spending, Greenspan said the increases in asset prices "can readily disappear". However, a more careful approach could lead to an economic slowdown as spending would decline. "This is the reason that history has not dealt kindly with the aftermath of protracted periods of low risk premiums," he said. Greenspan also said that developing U.S. protectionism and budget deficits are a threat to the flexibility of the economy, saying it is that flexibility "that has fostered our extraordinary resilience to shocks". If it can be maintained, Greenspan predicts that some economic imbalances can be absorbed. --more 2354 Local Time 2054 GMT
