US economic flexibility helps weather soaring energy prices: Greenspan

The US economy has withstood well the sharp rise in energy costs over the past two years because of its flexibility, US Federal Reserve (Fed) Chairman Alan Greenspan said on Friday.

Speaking at a central bank gathering in Jackson Hole, Wyoming, Greenspan said that the US economy's greatest strength is its flexibility which has allowed it to respond to a variety of shocks in the past decades.

"The flexibility of our market-driven economy has allowed us, thus far, to weather reasonably well the steep rise in spot and futures prices for crude oil and natural gas that we have experienced over the past two years," Greenspan said in his prepared remarks.

"The more flexible an economy, the greater its ability to self- correct in response to inevitable, often unanticipated, disturbances," he said.

"Enhanced flexibility provides the advantage of allowing the economy to adjust automatically, reducing the reliance on the actions of monetary and other policymakers, which have often come too late or been misguided," Greenspan said.

He said the flexibility of the US economy is the most important policy asset in handling any shocks from a fall in asset values.

The US Fed chairman also said that creeping trade protectionism and bloated budget deficits pose a risk to the long-term US economic vitality.

"Developing protectionism regarding trade and our reluctance to place fiscal policy on a more sustainable path are threatening what may well be our most valued policy asset: the increased flexibility of our economy, which has fostered our extraordinary resilience to shocks," he said.

Greenspan made the speech to an annual Fed conference titled " The Greenspan Era: Lessons for the Future." Other Fed policy- makers, economists, academics and central bank officials from around the world attended the conference.

Source: Xinhua