Alan Greenspan
Alan Greenspan
Alan Greenspanis an American economist who served as Chairman of the Federal Reserve of the United States from 1987 to 2006. He currently works as a private adviser and provides consulting for firms through his company, Greenspan Associates LLC. First appointed Federal Reserve chairman by President Ronald Reagan in August 1987, he was reappointed at successive four-year intervals until retiring on January 31, 2006, after the second-longest tenure in the position...
NationalityAmerican
ProfessionEconomist
Date of Birth6 March 1926
CityNew York City, NY
CountryUnited States of America
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is on an unsustainable path, in which large deficits result in rising interest rates and ever-growing interest payments that augment deficits in future years.
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Because it is a highly leveraged operation and one which requires very sophisticated hedging of interest rate risk, it's imparting a significant potential systemic risk to the American financial system,
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Somewhat to my surprise, this came out as a far more robust relationship, indicating the greater the deficit, the greater the long-run interest rate,
alert bring demand growth interest line market open potential rates remained risen robust signs spending stay
To date, interest-sensitive spending has remained robust and the FOMC (Federal Open Market Committee) will have to stay alert for signs that real interest rates have not yet risen enough to bring the growth of demand into line with that of potential supply, even should the acceleration in productivity continue,
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fully appreciate the risk that some households may have trouble meeting monthly payments as interest rates and the macroeconomic climate change.
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If we can maintain an adequate degree of flexibility, some of America 's economic imbalances, most notably the large current account deficit and the housing boom, can be rectified by adjustments in prices, interest rates, and exchange rates rather than through more-wrenching changes in output, incomes, and employment.
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Lower budget deficits are the surest and most direct way to increase national saving. Higher national saving would help to lower real interest rates, spurring spending on capital goods so as to put cutting-edge technology in the hands of more American workers,
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I find it utterly inconceivable, frankly, that we can have the type of potential fiscal outlook, which now confronts us over the next 15 to 20 years which, unless addressed, will not have a significant impact on long-term interest rates,
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To develop a financial center ... the issue isn't interest of developing infrastructure.
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We don't look at stock prices and say, 'If they are rising we have to raise interest rates,' ... To the extent that the stock market affects the economy, we will respond to that.
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There are powerful reasons to suspect that the elimination of the double taxation of dividends and cuts in marginal tax rates will elevate long-term productivity, ... If, however, in the process we get a significant increase in deficits, which induce a rise in long-term interest rates, that will be a significant undercutting of the benefits achieved by tax cuts.
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I have one other issue I'd like to throw on the table. I hesitate to do it, but let me tell you some of the issues that are involved here. If we are dealing with psychology, then the thermometers one uses to measure it have an effect. I was raising the question on the side with Governor Mullins of what would happen if the Treasury sold a little gold in this market. There's an interesting question here because if the gold price broke in that context, the thermometer would not be just a measuring tool. It would basically affect the underlying psychology.
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Large deficits will result in rising interest rates and an ever-growing ratio of debt service to GDP (gross domestic product),
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Our operating procedures, as you suggest, do tend to smooth out short-run fluctuations in short-term interest rates,