Robert Rubin Warns New Deficits Could Result in a Crisis at Any Moment

Former Treasury Secretary Robert Rubin's warnings about the economy and debt situation are getting louder and louder. Speaking at CME Group’s Global Financial Leadership Conference in Naples, Fla, he warned that Federal deficits are on an unsustainable trajectory, and large state and local budget gaps must be closed. He also said:

I think the prospects for the United States economy for both the short term and the long term are the most complex and uncertain of my adult lifetime.That obviously creates an extremely difficult decision-making environment for investors, for business people, for policymakers and for our people...

Substantial new deficits could also lead to sudden and unexpected disruptions in market psychology and, following from that, disruptions in the bond market....

He also added that a weaker dollar could lead to dangerous competitive devaluations and that those devaluations could lead to financial chaos, or restrictive trade measures elsewhere in the world. Commodity prices are already increasing as a result and could undermined the development of additional demand, he said, but the most serious problem is that the new program of quantitative easing has heightened existing concern that we might, at some point, monetize our debt to try to inflate our way out of our fiscal problems.

Rubin noted the box the U.S is in given that the politics of deficit reduction are enormously difficult, because the American people do not want tax increases or spending reductions that would affect them.