Former Federal Reserve Chairman Alan Greenspan told CNBC Friday that rising stock values have played a critical role in the economic recovery. The stock market got a boost from the Fed policy to boost liquidity, which drove interest rates down and pushed investors toward riskier investments like stocks.
Equities have risen more than 80% from the lows set during the financial crisis, noted Greenspan, benefiting investors and helping fuel the recovery.
"I think we are underestimating and continuing to underestimate how important asset prices, very specifically equity prices, are not only to shareholders but the economy as a whole," he said.
Greenspan said he worries about the continued drop in housing prices, but he believes the industry would significantly recover if prices stabilize.
As for the European debt crisis, Greenspan is more concerned about countries not within the European Union. He pointed out that while not all EU members have managed to maintain EU restrictions regarding debt and deficit levels, at least they work toward a "common interest."