Courtesy of Mish.
Former Fed Chairman Alan Greenspan spoke with Tom Keene and Mike McKee for Bloomberg TV & Radio. He discussed the ramifications of negative interest rates, entitlement spending, and declining productivity.
On the state of the U.S. and global economy, he said: “We’re in trouble basically because productivity is dead in the water.”
On whether he is optimistic going forward, Greenspan said: “No. I haven’t been for quite a while. And I won’t be until we can resolve the entitlement programs. Nobody wants to touch it. And that is gradually crowding out capital investment, and that’s crowding out productivity, and it’s crowding out the standards of living where do you want me to go from there.”
Greenspan was critical of negative interest rates but refused to comment directly on the recent decision of the ECB. He is also worried about interest rates and the level of debts.
Key Quotes
- Entitlements now probably require a three to four percent growth rate in the United States.
- Rate cuts, negative interest rates, buying corporate debt is no part of the solution.
- Gross domestic savings as a percent of GDP has been declining over the years largely because entitlements have dug into them.
- You just can’t print money and buy the infrastructure. Productivity will only increase if there is savings behind the investment.
- We should be more concerned about inflation than we appear to be.
- The issue is how long can we maintain long-term interest rates by continuously pushing money into the system, at rates which I would say, human psychology doesn’t continence.
Interview Transcript Courtesy of Bloomberg
DAVID WESTIN: Thanks very much, Stephanie. So we are here sitting with Dr. Alan Greenspan, who led the Fed for eighteen and a half years. I ask him, he’s very precise about this. So welcome to Bloomberg GO. It’s great to have you here. Beyond that, he’s really one of the major economic thinkers of our era.
So we had the Bank of England just hold their rates. We had the Fed yesterday, we’ve had the Bank of Japan. It’s all about central banks right now. Everyone one of those central banks, whatever their approach, is focused on growth and the problem of getting growth going. …..
