Submitted by Taps Coogan on the 14th of December 2018 to The Sounding Line.
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The former Chairman of the Federal Reserve, Dr. Alan Greenspan, recently spoke with Fox Business News to warn about a slowdown in the US economy, which he believes is headed for stagflation. He also expressed deep concerns about financial imbalances in Europe.
Alan Greenspan:
“We’re moving into a state of stagflation which we haven’t seen in this country for quite a while. It’s slow. It’s progressive, but if you look at productivity, which is the key statistic in the economic outlook for the United States, we’re not doing all that well. Indeed, since the 2008 crisis our productivity growth rate has been averaging something like 1.25% annually. In the heyday of American expansion earlier in the post WWII period, we were up to 3%. So, this is a very extraordinarily subdued economy… It’s not something that’s going to go away… This economy is not accelerating by any means…”
When challenged about the increase in US GDP growth so far this year, Dr. Greenspan noted:
“Just wait until the fourth quarter (GDP growth) number comes out. It’s going to be down around 2.5%. We have monthly data that suggests we are slowing down. We’re not going negative, but we are definitely slowing down the rate of growth as we go into 2019, probably at a 2% to 2.5% maximum…”
On Europe, Dr. Greenspan noted:
“I am a little more concerned about Europe than for most people for one very important reason. Nobody talks about Target2, which is the European central bank clearing mechanism… What this is, is the clearinghouse for all of the central banks, with the Deutsche Bundesbank being the largest obviously, and it’s so large that it’s net credit on the rest of Europe is two-thirds. It’s got 900 billion euro credits, mainly against Spain and Italy. That is something that worries me immensely because it is an unstable situation. Unless and until we get that straightened out, it’s hard to imagine Europe advancing in a significant way and that will spillover into the United States one way or the other.
There is more to the interview, so enjoy it above.
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