A US recession looks like the “most likely outcome” for 2023, former Federal Reserve chair Alan Greenspan warned Tuesday.

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• Former Federal Reserve chair Alan Greenspan shared his outlook for 2023 in a recent investment commentary.
• He warned a US recession is now “the most likely outcome” – and slammed bankrupt crypto exchange FTX.
• Here are the 10 best quotes.

Alan Greenspan said a US recession is coming, warned against a Federal Reserve pivot, and called a war between China and Taiwan a potential “black swan” event in a recent investment commentary.

The five-term Fed president also slammed bankrupt crypto exchange FTX as “purely fraud” and said that digital assets demonstrate the greater fool theory – when investors pile into overvalued assets because they know they can later sell them to a “greater fool” at a higher price.

Since retiring as Fed chair in 2006, Greenspan has worked as a private advisor and financial consultant.

Advisors Capital Management released the 96-year-old economist’s outlook for 2023 in the form of a question-and-answer session published Tuesday on the firm’s website. 

Here are the 10 best quotes from Greenspan’s Q&A session, lightly edited for clarity:

1. On the state of the US economy heading into 2023: “A recession does appear to be the most likely outcome at this time.”
2. On inflation and the labor market: “Wage increases, and by extension employment, still need to soften further for a pullback in inflation to be anything more than transitory. So, we may have a brief period of calm on the inflation front but I think it will be too little too late.”
3. On the Federal Reserve’s mandate: “Unlike stock markets, it is not the job of the Federal Reserve to fearfully anticipate recessions… The Fed acts as a moderating force upon animal spirits so that the economy neither overextends during bouts of euphoria nor descends into panic during times of stress.”
4. On the ongoing reverse currency war: “Only three months ago, alarm bells were ringing that the US dollar may be appreciating too quickly and could cause ‘something to break‘… That risk has receded, but it demonstrates how even sound domestic monetary policy can lead to global financial stress.”
5. On investors’ hopes that a Fed ‘pivot’ will trigger a stock-market rally: “Inflation could flare up again and we would be back at square one. Furthermore, this could potentially damage the Federal Reserve’s credibility as a purveyor of stable prices, especially if the action were seen to be taken merely to protect the stock market rather than in response to truly unstable financial conditions.”
6. On whether this year will be as volatile as 2022: “I do not expect 2023 to be as volatile. We went from a Federal Reserve that expected inflation to be transitory to one that deemed seven consecutive rate increases over ten months necessary to tamp down inflation… Add in the massive amount of uncertainty generated by the war in Ukraine and I believe 2022 would be a tough year to top with respect to market volatility.”
7. On the collapse of major crypto exchange FTX: “Based on the information that has come to light so far, the collapse of FTX was not a result of lax risk management, inadequate accounting procedures, or some feature inherent to crypto – it was purely fraud.”
8. On cryptocurrencies: “I view the asset class as too dependent on the ‘greater fool theory‘ to be a desirable investment.”
9. On “black swan” events: “The black swan event I think markets, and really the world at large, ought to be most worried about is some kind of conflict erupting between China and Taiwan.”
10. On semiconductors: “The sheer amount of world trade that currently flows through that region, and the number of semiconductors fabricated by Taiwanese firms upon which the technologies we enjoy rely, make any conflict [between China and Taiwan] a potential nightmare scenario.”

Read more: A war between China and Taiwan is the economic ‘black swan’ investors should be most worried about, ex-Fed chair Alan Greenspan warns