Greenspan’s Dose of Realism

Former Fed chairman,  Alan Greenspan, dishes out some real gems to CNN’s Ali Veshi on the fiscal cliff and the country’s current economic situation, in general.   He almost sounds like the inflation slaying Paul Volcker.  Rather than inflation this time, it’s runaway government spending.   Greenie says that a small recession may be worth the price to arrest that demon.

No worries, however,  as we have a monetary policy repressing the government’s borrowing costs, which are at record lows.  At the end of October, for example, the average rate on all interest bearing marketable Treasury securities was 2.075 percent.  This is less than half the 4.857 percent average interest rate paid on the public marketable debt in October 2007.   Of course interest rates will never reset higher, right?

The markets are currently grappling with some of these broader issues Greenspan discusses, of which, the fiscal cliff is just a small part.   We will be selling on the  cliff deal unless it really addresses the country’s long term structural fiscal problem.

The final deal should include a package of growth measures,  preferably on the supply side,  and it doesn’t necessarily mean taking a hatchet to current spending and raising taxes through the roof.    Good luck on that one.

Greenspan’s money quotes:

- If we don’t close this deficit, fairly quickly, we are in real trouble.
– …until we reign in the spending growth,  this economy can’t function.
-…we’re not going to get out of this thing without paying…all the low hanging fruit of solving these types of problems has long ago been picked.

-  Alan Greenspan,  CNN Money – November 16, 2012

Click here for interview.   It’s worth the three minutes.

(click here if photo is not observable)

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4 Responses to Greenspan’s Dose of Realism

  1. gfmurphy101 says:

    Is that the same guy that admitted to “getting it wrong” , the guy that let bankers do what they wanted because he believed “they would act in the best interests of their shareholders” !!! Of course we all know where that led to ,,,,,,,Lehmans etc and ,global depression!!

  2. chaletfor2 says:

    Alan Greenspan? Surely you jest! The man who couldn’t see the housing bubble and destroyed the economy and said he didn’t think such a thing was possible even though many had stated so? I’d not even give him a rotten tulip bulb. He’s a charlatan.

  3. steve says:

    So in a nutshell his philosphy is spend like a drunken sailor when times are good and dont bother mending the roof. And when the economy is suffering debt deflation, excess capacity and a chronic lack of demand we need to decrease spending. He is just a mouthpiece for the big banks.

  4. Otis says:

    I would believe Greenspan anytime of you spend, spend, spend types.

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