Greenspan: Western World Headed for a State of Disaster

Former Federal Reserve Chairman Alan Greenspan has a dire warning about the economy. During an exclusive interview on The FOX Business Network’s Cavuto: Coast to Coast he told Neil Cavuto the U.S. has “a global problem of a shortage in productivity growth” and is headed for a state of disaster.

“What the Fed does at this particular stage is less important than what the markets are doing. And what the markets are beginning to show us is acceleration in money supply for the first time in a very long time… We have a global problem of a shortage in productivity growth and it’s not only the United States but it’s pretty much around the world and it’s being caused by the fact that the populations everywhere in the Western world, for example, are aging and we are not committing enough of our resources to fund that,” he said.

Greenspan said the main thing confronting our country and the global economy is long-term economic growth.

“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 the Western world, there is a very large migration from being a worker into being a of recipient of social benefits as it is called. And this is legally mandated in all of our countries. The size has got nothing to do with the rate of growth in economic activity, but if we stay down at the two percent economic growth in the United States and elsewhere, we’re not going to be able to fund what we are already legally obligated to spend,” he said.

Former Reagan budget director David Stockman on Wednesday told Neil Cavuto the U.S. could be on the verge of a market economic collapse but Greenspan says “we need not go that far.”

“Since 1975, the sum of gross domestic savings and entitlements as a percentage of GDP has been remarkably flat and what that tells us is all the way back to ’65 we have essentially been seeing a one Dollar to one Dollar tradeoff between entitlement growth and gross savings decline. And despite the fact that we are borrowing savings from abroad its’ kept our rate of capital investment as a percent of GDP going down,” he said.

Greenspan who is “not exactly” a fan of Donald Trump or Hillary Clinton also discussed their opposition to trade deals and why they are critical to economic growth.

“People don’t realize, they think that you’re going to shut off, for example, imports from China, that somehow will create jobs in the United States — it doesn’t. Instead of getting goods out of China you will get them out of the Philippines or someplace else. But before they come back to the United States, they will try other places around the world where labor costs are perceived to be cheaper. So the issue of foreign trade is something which has helped the country grow all the way back to 1790 and the presumption that of sudden we’re turning off on trade is very narrow-minded in my impression,” he said.

By Julia Limitone Published May 26, 2016 Business Leaders