Former Federal Reserve Chair Alan Greenspan said the U.S. central bank and their global colleagues have done as much as they can with easy money policies and keeping rates at record lows. The only viable option now, especially for America, is entitlement reform.
"What we have to do but nobody wants to touch is a rise in entitlements in the United States," he told CNBC. "Until we come to grips with that, we're going to get a continuous downward pressure ... in capital investment and then in productivity," he said.
He said he’s heard nothing from the presidential candidates about entitlement reform, because it is the deadly third rail. Greenspan said any candidate brave enough to bring up the topic will ultimately lose an election.
Meanwhile, he explained that while the Fed prefers not to raise interest rates so close to a presidential election, policymakers would do so if economic data mandate it.
"The real question essentially is would the Federal Reserve hold back when it should be moving, I would say, ‘No,’" Greenspan said, but he didn’t indicate that he was speaking about the upcoming FOMC meeting.
He urged Janet Yellen ignore Donald Trump’s allegations that her reluctance to raise interest rates has been politically motivated.
“I have great sympathy for her. I’ve been through that routine periodically for a long time,” Greenspan said. “You have to grin and bear it. It’s the only thing you can do,” Greenspan said.
The election is a factor for the Fed “but it’s not involved in the decision-making,” Greenspan explained. Fed officials “are aware that there is an election out there. They would prefer not to do something during an election. But, if it is called for, it is done,” he said.
In a wide-ranging interview, Greenspan said:
- He is worried about 1970s style 'stagflation'
- He's still concerned about the Brexit spillover and how it is too soon to determine the impact of Brexit.
- Negative rates seen in Europe and Japan are not good. "If you have negative interest rates, and stay too long, a number of the financial intermediaries drop out. And they are on the edge," he said.
Meanwhile, Greenspan himself does have his critics. For example, Newsmax Finance Insider Jeff Snider contends that "Greenspan’s credentials say nothing; his track record is all that should matter when judging the worth of his opinions."
Greenspan "doesn’t know what he is talking about and there is a mountain of evidence, including his own words, that show that he never did," Snider, in a recent blog, explained.
"We are stuck in this economic depression not just because of his past tenure, but more so now because constant reverence prevents acceptance of these facts. The recovery doesn’t start until the “maestro’s” legend dies, and with it all the confusion and misconstruction about how markets and the economy actually work," Snider wrote.
(Newsmax wire services contributed to this report).
© 2023 Newsmax Finance. All rights reserved.