“By any measure, real long-term interest rates are much too low and therefore unsustainable,” former Federal Reserve chairman Alan Greenspan said in an interview with Bloomberg. “When they move higher they are likely to move reasonably fast. We are experiencing a bubble, not in stock prices but in bond prices. This is not discounted in the marketplace.”
“The real problem is that when the bond-market bubble collapses, long-term interest rates will rise,” Greenspan said. “We are moving into a different phase of the economy -- to a stagflation not seen since the 1970s. That is not good for asset prices.”
Stagflation is very possible. It is something I have been warning about in the EPJ Daily Alert.
My thinking is pretty much in sync with Greenspan's although I am not as optimistic about the stock market as he is.
That said, this is not the time to own bonds of any kind corporate or Treasury.
-RW
Where was Greenspan 20 years ago when warning about bubbles could have made a difference? Oh right, he was inflating them back then.
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