Federal Reserve chairman Alan Greenspan is spoke earlier today at the Fed’s retreat sponsored by the Federal Reserve Bank of Kansas City, in Jackson Hole, Wyoming.

Greenspan talked down the “wealth effect”, arguing that wealth in housing is more influential on spending than wealth in stocks. Some economists see it as a good sign that Greenspan is embracing housing wealth as a sign of strength for the consumer, while others are disparaging his move to abandon the wealth effect, which he used to argue for rate rises on the upside.

He suggested that current notions such as the wealth effect may not be valuable in the construction of monetary policy. “A great deal of additional work will be necessary to better understand and to confirm the nature and magnitudes of the relationships between capital gains on houses and stocks — realized and unrealized — and consumer spending.”

“As we endeavor to better understand how changes in the level and composition of wealth affect economic behavior, new accounting systems may be required to supplement those that have long served us so well. Technology has facilitated the production of information at a far faster rate than at any time in the past. But in the information economy, it remains up to us to organize and use that information in ways that improve the quality of decision making.”