Alan Greenspan Sees Pause in Recovery, Stalled Wealth Effect

Former United States Federal Reserve Chairman Alan Greenspan recently told CNBC that the nation's economy recovery is in the middle of a "typical pause." He asserted a strong connection between the stock market and the economy, stating that the recovery will be driven by the direction of stock prices due to the wealth effect. "While ordinarily we're seeing the stock market driven by economic events, I think it's more the reverse," Greenspan said to CNBC. "What we do know is stock prices are a leading indicator." Since small businesses are not thus far powering America's economic engine, Greenspan placed a higher emphasis on banks and wealthy individuals to support growth with higher levels in investment -- i.e. stocks, bonds and other aspects of the financial markets.