Former Federal Reserve Board Chairman Alan Greenspan, in numerous recent interviews on a book promotion tour, has warned he sees a wide variety of threats to President Donald Trump's robust economy.
"Crises gets generated after a period of time when you disregard [something],” Greenspan told Barron’s.
“Most recently, we’ve disregarded the federal budget. We are going to have a $1 trillion deficit in the next fiscal year." said Greenspan, who led the Federal Reserve from 1987 to 2006, serving through booms and recessions.
"But when inflation goes up to 4% to 5%, it is politically disastrous. That's when it becomes an issue. But when it starts rising, it’s already too late in the game to stabilize it," Greenspan said.
Investopedia summarized seven threats Greenspan explained to Barron’s:
- Skyrocketing U.S. federal budget deficit
- Soaring inflation
- Falling U.S. national savings rate
- Plunging productivity
- Bond market bubble
- Undercapitalized banks
- Trade-tariff wars
Greenspan specifically warned 90.9 WBUR-FM, Boston's NPR news station, that America's aging population is straining programs like Social Security, which is in turn driving up the country's deficit and negatively impacting the wider economy.
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"The official actuaries of the Social Security system say in order to get our Social Security and retirement funds in balance, they'd have to cut benefits by 25 percent indefinitely into the future," said Greenspan, who is promoting a new book "Capitalism in America: A History," co-written with Adrian Wooldridge.
"Do I think it's going to happen? Well I don't know, but this is one of the reasons why inflation is the major problem out there. So long as you don't do it, you're going to cause the debt overall — the total government debt — to rise indefinitely, and that is an unstable situation," Greenspan said.
Greenspan also warned that old-fashioned fear also could threaten future economic prosperity.
"When you deal with fear, it is very difficult to classify," he told WBUR-FM Here & Now's Jeremy Hobson.
"But you can look at the consequences of it, and the consequence is basically a suppressed level of innovation and therefore of capital investment and a disinclination to take risks."