By Bridget Johnson - 08/01/10 03:20 PM EDT
Former Federal Reserve Chairman Alan Greenspan said Sunday that the country was at a "pause" in its "modest recovery" from recession, but cautioned that a "very distorted economy" was showing recovery in relatively few areas.
Greenspan said on NBC's "Meet the Press" that the areas in recovery — the highest income earners, large banks and corporations — were spending and "carrying what consumption there is." The rest of the economy — small businesses, small banks and a large chunk of the labor force — were still suffering.
The "average of the two" disparities, he said, equal a modest recovery.
Greenspan said a double-dip recession is possible if home prices go down. "It's touch and go," he said.
The former Fed head said the "gradual increase" in employment wasn't enough to reduce unemployment levels, and that he saw nothing out there to alter the trends.
Greenspan wouldn't make predictions about the future of the Dow, but said "we underestimate the impact of stock prices on economic activity."
He did note what he saw as a "destructive schism" playing out between the financial sector and Washington.
"I've never seen the type of animosity between the government and Wall Street," Greenspan said, adding he was "not sure where it comes from."