- Former Fed Chair Alan Greenspan told CNBC on Thursday that inflation, the coronavirus, and budget deficits are the critical issues the US is facing right now.
- Greenspan contrasted the uncertainty of the coronavirus with what he saw as a clear increase in entitlements and growing budget deficits that are getting “out of hand.”
- “My overall view is that the inflation outlook is unfortunately negative and essentially the result of a huge increase in entitlements that are crowding out private investment and productivity growth,” he said.
Alan Greenspan told CNBC on Thursday that the critical issues facing the US are inflation, the unknowns surrounding the coronavirus, and the budget deficit.
The former chairman of the Federal Reserve said that the US is underestimating the size of the budget deficits that are down the road, as the number of Americans retiring and receiving entitlements increases. While much about another critical issue, the coronavirus, remains unknown, Greenspan said he is certain there will be an “extraordinary increase in retirement” ahead.
Budget deficits have increased as the government has spent to help the economy through the pandemic. The federal budget deficit reached a record $3 trillion in August.
“We’ve got to resolve the budget deficits that are getting out of hand,” Greenspan said.
An increase in entitlements is also creating a demand for funds, which affects the markets, Greenspan said.
“My overall view is that the inflation outlook is unfortunately negative and essentially the result of a huge increase in entitlements that are crowding out private investment and productivity growth, which is slowing down to about a 1% annual rate,” he said.
Greenspan added: “All in all my major concern is inflation. It obviously hasn’t emerged in any significant way as yet, but I think that’s the area where our problems lie.”
Thursday’s CNBC appearance was his first televised interview since the pandemic began. He said the US knows very little about the coronavirus, “so we pretend a great deal.”
He also said the current Fed is doing well given the uncertainty around the coronavirus.
“They are really dealing with the unknown, we can guess, we can hypothesize … we will learn certain things but not enough to give us real insight into forces which engender stock prices, bond prices, or the like,” Greenspan said.
“I think that so far from what I can judge things are going well there,” he said, referring to the current Fed.
Powered by WPeMatico
