Former Federal Reserve Chairman Alan Greenspan admits he is “quite” worried about a bond market bubble.
And he’s not so proud of the American economy, but as shaky as it may appear, it’s the best in the world.
“The United States, strangely enough, as badly as we are doing – is still the best of the worst. Nobody is doing well,” he told Fox Business Network.
“And that still doesn’t make us any better.”
Greenspan refused to speculate about when Federal Reserve Chairman Janet Yellen will raise interest rates.
“I refuse to discuss that publicly,” he said. "And people don’t realize that interest rates are a very interesting economic phenomenon,” he said.
“The Federal Reserve is doing the best it can. It’s a very tough position they’re in and they’re very smart and I know because I’ve dealt with all these people for a number of years,” he said.
“What people are not focusing on is we have a bond market bubble and when that decides to work its way off we’re in trouble," he said.
In the past two months, the price on the U.S. 10-year Treasury has plunged — driving the yield 25 percent higher.
In the June 17 week, total bond funds saw nearly $4.1 billion in outflows—on top of a $2.9 billion exodus the June 10 week, according to the tracking group Investment Company Institute (ICI), CNBC reported.
Since the beginning of the year, however, investors put $42.7 billion into bond funds, after adding $43.5 billion last year.
He admitted that he fears the bond market bubble throughout the global markets.
“Just think in terms of the issue, the concern everyone has about the level of debt, think about what the level of debt means when interest rates move.”
He also is worried about Greece’s impact on the United States.
“A direct impact occurs because of the fact Europe or basically if you want to put it this way, the Eurozone is a very significant part of the internationally community and as a consequence there is no way in which that cannot affect the United States negatively.”
Some experts think the bubble has already popped and the global economy is already spiraling out of control.
Greece has begun defaulting on its debt and may have to leave the eurozone. Chinese stocks have dropped 28 percent since June 12. And oil prices have plummeted 14 percent since June 23.
"Add it all up, and we’re looking at a turning of events for the worse," writes Canada Financial Post columnist Joe Chidley.
"The Greeks, fittingly enough, had a word for it: catastrophe."
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