Posted on 06/17/2010 6:20:10 PM PDT by Wpin
An urgency to rein in budget deficits seems to be gaining some traction among American lawmakers. If so, it is none too soon. Perceptions of a large U.S. borrowing capacity are misleading.
Despite the surge in federal debt to the public during the past 18 months—to $8.6 trillion from $5.5 trillion—inflation and long-term interest rates, the typical symptoms of fiscal excess, have remained remarkably subdued. This is regrettable, because it is fostering a sense of complacency that can have dire consequences.
The roots of the apparent debt market calm are clear enough. The financial crisis, triggered by the unexpected default of Lehman Brothers in September 2008, created a collapse in global demand that engendered a high degree of deflationary slack in our economy. The very large contraction of private financing demand freed private saving to finance the explosion of federal debt. Although our financial institutions have recovered perceptibly and returned to a degree of solvency, banks, pending a significant increase in capital, remain reluctant to lend.
Beneath the calm, there are market signals that do not bode well for the future. For generations there had been a large buffer between the borrowing capacity of the U.S. government and the level of its debt to the public. But in the aftermath of the Lehman Brothers collapse, that gap began to narrow rapidly. Federal debt to the public rose to 59% of GDP by mid-June 2010 from 38% in September 2008. How much borrowing leeway at current interest rates remains for U.S. Treasury financing is highly uncertain.
(Excerpt) Read more at online.wsj.com ...
That old fool. He was complicit in the low interest rate strategy and letting the housing and mortgage markets blow out of control. And allowed for the creation of the TBTF institutions.
FU, Greenspan. Another “I made my millions, so screw you!” Federal government worker.
Unless you have a subscription don’t bother clicking.
Oh and the title says ‘the Government could recover quickly’...well duh. How about the taxpayers?
You are sorely mistaken...Mr. Greenspan has been a strong advocate for fiscal restraint for years. You just have read the “six minute expert” reporter version of what he says.
yes but much of this started on his watch and how about CRA and fannie mae and freddie mac crap...he was oh so quiet then
Yes, he abbetted a lot of the banksters’ scam “products” including permitting bad real estate loans to poor people based on socialist racial quota arguments and demands.
It was up to him to pull the politican’s and bankster’s pants down and rescue the integrity of our system and instead he went along to get along with the corrupters and theives. I think he is smart and knew what was happening.
He was not as quiet as the media presented by any sense of the word. I watched him time after time on Cspan and he spoke the truth. He is a very good economist and a full supporter of the free market system. Unfortunately, for him and us the dam* liberal media would literally misrepresent what he would say. Remember, he was limited to money supply adjustment, not regulatory policy like Fannie Mae, etc. those were/are in the hands of congress.
“Unless you have a subscription don’t bother clicking.
Oh and the title says ‘the Government could recover quickly’...well duh. How about the taxpayers?”
You do not have to be a member to post on WSJ threads. You also did not read the title correctly. It says: Don’t be fooled by today’s low interest rates. The government could very quickly discover the limits of its borrowing capacity.
It is warning that when interest rates rise we will be in very serious trouble...try discerning a little bit what you read, this stuff is too important to whiz through.
Alan Greenspan has been a brilliant proponent of the free market system. Unfortunately the liberal media has distorted much of what he said as FED chairman. He is a brilliant economist who is worth reading/listening to.
He does not use excessive emotion in his remarks, never did. But, for anyone who has an inkling of economics he has been quite “loud” in his warnings for years of our deficits, debt, and social programs.
Was the problem low interest rates or extending credit where it never should have been extended? Low interest rates with high credit standards seems reasonable.
This crap has been going on for years and I don’t think it will ever stop. Article below from Jan 11, 1938 Emporia Gazette:
Congressman Raps
New Deal Propaganda
Washington, -Jan. 11 (/P)—Representative
Mason (R-I11), said today,
the federal government was
spending more than JaO.OOO.COO a
year “to spread propaganda for the
New .-Deal.”
.- Mason inserted in the congressional
record a statement defend
ing low postage rates for newspapers.
. /
- “We are -told that-the government
loses $30,000,000 each year in
postal ‘ revenue because of its low
postal rate for newspapers,” he
said, “Do you think $30,000,000 is
too much to spend each year to
help spread the truth when we
spend over $50,000,000 to • spread
propaganda in favor of the New
Deal?” ‘ . ‘ . : . . . . • - ‘
: Mason said government departments
dispatched 100,000 pieces of
franked mail a day, and that’”the
cost.;of ‘ printing and’ distributing
New Deal material during the present
administration has been estimated
at t217,453,043;”
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