U.S. economy may not be a healthy one
Creeping trade protectionism and bloated budget deficits pose a risk to the United States’ long-term economic vitality, Federal Reserve Chairman Alan Greenspan warned Friday. “Developing protectionism regarding trade and our reluctance to place fiscal policy on a more sustainable path are threatening what may well be our most valued policy asset: the increased flexibility of our economy, which has fostered our extraordinary resilience to shocks,” the Fed chief said in a speech to an economic conference here, sponsored by the Federal Reserve Bank of Kansas City. Maintaining economic flexibility is especially important, Greenspan said, to deal with what he called some of America’s current economic imbalances: the swollen current account trade deficit, which surged to a record $668 billion last year, and the housing boom. Greenspan also worried in his speech about what will occur with the ending of the recent sustained period of low interest rates and low risks for investors. “History has not dealt kindly with the aftermath of protracted periods of low risk premiums,” he said in his prepared remarks. Greenspan’s speech was to a conference titled “The Greenspan Era: Lessons for the Future.” The Fed chief, who has steered the world’s largest economy through both smooth and choppy economic waters for 18 years, plans to step down in just five months.
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