Wednesday, June 1, 2016

Alan Greenspan Warns About the Long Term Health of the Economy

Former Federal Reserve chairman Alan Greenspan told Neil Cavuto on the FOX Business News channel:
Entitlements are crowding out savings, and hence capital investment. Capital investment is the critical issue in productivity growth, and productivity growth in turn is the crucial issue in economic growth. We're running to a state of disaster unless we turn this around.

This should be the central issue of the presidential debate. Unless and until we can rein in entitlements, which have been rising at a nine percent annual rate in the United States and comparable levels throughout the world, we are going to find that productivity is going to maintain a very low rate of increase.
Greenspan made clear he wasn't talking about Fed-created business cycle and recession problems:

I don't think that's our problem. Our problem is not recession which is a short-term economic problem, I think you have a very profound long-term problem of economic growth at the time when in the Western world there is a very large migration from being a worker to being a recipient of social benefits.

1 comment:

  1. This was surprisingly intelligible compared to what he used to say during his tenure as Fed chairman.