Former Federal Reserve Chairman Alan Greenspan said that the recent stock market decline is "typical" of a recovery, and that international instability has more to do with the recent decline than problems in the United States. "What we're looking at is an invisible wall, which we've run into here. Which, essentially, as far as I can see, is a typical pause that occurs in an economic recovery," Greenspan said in an interview with CNBC. "Ordinarily we're saying that the stock market is driven by economic events, I think it's more in the reverse." "I will grant you that this is not a normal economic recovery. We've just come out of what I believe is the most extraordinary and virulent global financial crisis that the world has ever seen," he said. "This recent decline is more international than it is a domestic affair," he said, adding that "there is an inherent instability in the euro system."
| More from CNBC Unpopular TARP Could End Early |
Morici: Double Dip or Off a Cliff?
Valliere: A GOP Conspiracy to Weaken the Economy?
The ADP Employer Services report released Wednesday, for example, showed that large and medium sized businesses with over 50 employees reported an increase in hiring in June, while small businesses with fewer than 50 workers reported a decrease. One of the reasons that small businesses are not hiring, Greenspan said, is because smaller banks are loaded up with commercial loans -- a less attractive investment -- and aren't lending. "Small business is in real serious trouble," he said. In the far-ranging interview, Greenspan said that raising the capital gains tax in the U.S. would be ill advised. He also added that the financial crisis could not have been foreseen. "It is just not feasible to forecast a financial crisis," he said. "A financial crisis by definition is a sharp, abrupt, unexpected decline in asset prices."