Bernanke, Greenspan Disagree on Impact of Corporate-Profit Peak

The disagreement between Alan Greenspan and Ben S. Bernanke about where the U.S. economy is headed boils down to just one word: profits.

For the 81-year-old former Federal Reserve chairman, a peak in profit margins is a sign the economic expansion may be past its prime and the risks of recession are growing. For his 53- year-old successor, the topping out of margins may instead herald better times for U.S. workers as wage increases start to catch up with the five-year boom in corporate profits.

Many economists -- including some who worked with Greenspan at the Fed -- side with Bernanke. If companies are accepting lower profit margins instead of raising prices to help offset increasing wages, that helps contain inflation. It also helps forestall the kind of Fed-engineered interest-rate rises that have often triggered recessions in the past.

Read more at Bloomberg.com