Tags: greenspan | economy | growing | slow

Greenspan: 'Extraordinarily Subdued Economy' Isn't Growing

By    |   Friday, 14 December 2018 09:48 AM

Former Federal Reserve Chairman Alan Greenspan warns that the U.S. economy isn’t growing as fast as others suggest.

“This is a very extraordinarily subdued economy,” Greenspan recently told Fox Business Network. 

“It is not something that is going to go away right away. And I think we don't pay enough attention to it, because this economy is not accelerating by any means,” he said.

“Just wait until the fourth quarter number comes out, it’s going to be down around 2.5 percent,” he predicted. “We have monthly data which suggests that we are slowing down, we are not going negative, but we are definitely slowing down – the rate of growth as we go into 2019 probably at a 2 to 2.5 percent pace maximum.”

“Gross domestic savings is the key funding to capital investment in the Unites States, and as a result we are seeing capital investments slowing down,” he said.

However in Greenspan’s opinion, although a recession is unlikely, the U.S. has entered a period of stagflation driven by runaway spending and entitlement programs.

“We are not funding our entitlements and as a result we have this huge deficit – [a] trillion dollar budget deficit,” he said. “You can’t exist with that sort of phenomenon without inflation re-emerging itself.”

Others are much more optimistic about U.S. economic growth.

White House economic adviser Kevin Hassett predicts that U.S. economic growth will defy expectations again in 2019 because of a business investment boom and President Donald Trump’s trade strategy.

“We’re definitely going to be at 3 or above 3 for next year as well,” Hassett told CNBC.

The Council of Economic Advisers chairman is hopeful that the sluggish housing market won’t hinder growth.

GDP has risen an average 3.3 percent through the first three quarters of 2018 and is expected to gain 3 percent in the fourth quarter.

However, most mainstream economists aren’t as optimistic, predicting 2019 growth of 2 percent to 2.5 percent.

Late last month, the government said the U.S. economy slowed in the third quarter as previously reported, but the pace was likely strong enough to keep growth on track to hit the Trump administration’s 3 percent target this year, even as momentum appears to have moderated further early in the fourth quarter.

Gross domestic product increased at a 3.5 percent annualized rate, the Commerce Department said in its second estimate of third-quarter GDP growth. That was unchanged from its estimate in October and well above the economy’s growth potential, which economists estimate to be about 2 percent.

Hassett admitted the “boom” in business investment “kind of leveled off a bit,” but he expects it to resume as companies bring back profits stashed overseas.

“If you’re wondering about the sustainability of the boom, the fact that we don’t have this out of control housing sector with runaway price increases should actually give you comfort that we don’t have worry about our financial institutions having another housing bust, because housing is really underperforming,” he said.

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Former Federal Reserve Chairman Alan Greenspan warns that the U.S. economy isn’t growing as fast as others suggest.
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2018-48-14
Friday, 14 December 2018 09:48 AM
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