Greenspan Worried About Inflation and Debt: Does Anyone Care What He Thinks?

Ex-Federal Reserve Chief Alan Greenspan outlined in a speech to Tokyo Clients of Deutsche Bank, his concern for inflation pressure in the United States “ It’s the politics in the United States that worries me, whether the Congress will basically feel comfortable with the Fed withdrawing its stimulus…if inflation rears its head, it will swamp long-term markets,” referring to bonds.  He went on to say “the U.S. must rein in its “very dangerous” level of debt, citing the threat of increased issuance of Treasuries undermining the dollar.  According to Bloomberg News, Greenspan went on to say that if there were a significant issuance of Treasury securities that increased the national debt, “there would be of necessity downward pressure on the dollar.” At the same time, he said, “you can’t say that without saying what the counterparty currency would be….Very Dangerous”.  All I can say is why does anyone care or better yet pay to hear what this man says anymore?  By his own admission he did not see the financial crisis coming something, many other economists and analysts predicted for years.  Secondly, it can be  argued that it was his policies, economic theories and politics which caused the crisis in the first place!

Mr. Greenspan told us for decades that we shouldn’t worry about the loss of manufacturing jobs in the United States.  This was the shift to the “New Economy” where  everyone would work in the service sector.  And everyone was willing to believe his theory until these high paid service sector jobs started being outsourced to other countries along with  manufacturing( i.e. information technology positions being outsourced to India and Eastern Europe).  What the average person failed to understand was that the “service sector” Greenspan really meant was the sale of financial products (i.e. derivatives).  The United States was importing everything it needed and was the only meaningful export was financial derivatives.  The “New Economy” was based on everyone having an MBA and being the world’s stockbroker.  Mr. Greenspan and his Wall Street cronies want the nation to believe that the US dollar must remain high relative to other currencies in order for the US to compete and maintain its standard of living.  In actuality, the US dollar must remain high for Wall Street to maintain its current lifestyle, the rest of the economy could benefit from a lower dollar.  Other countries have a better quality of life with a lesser valued currency.

I must also challenge the timing of Mr. Greenspan’s outcry regarding the deficit.  It is clearly politically motivated.  I did not hear him voice concern when the Bush Administration turned the Clinton budget surplus into a huge deficit by going to war in Iraq and slashing tax rates for the country’s wealthiest citizens.  Now that Democrats control Congress and the White House amid a crisis in which he is complicit, does he raise the specter of deficits? 

Please take Mr. Greenspan’s comments with a grain of salt, he has proven that he does not have the countries best interest in mind!