Greenspan concerned about US debt

• Source: Global Times
• [14:23 October 16 2009]
• Comments

Former Federal Reserve Chairman Alan Greenspan said Thursday that increasing US debt, not the weakening dollar concerns him, in a speech to the Council on Foreign Relations in New York.

According to Greenspan, the increasing debt is the most worrisome aspect of the American economy. He pointed out that in the long term, the US government's budget deficits will increase further, which will continue to exert more pressure on borrowing costs and exert less pressure on the devaluation of the US dollar.

Meanwhile, he said that he is not "not overly concerned" about the most recent decline of the dollar, which hit a 14-month low against the euro and other major currencies this week.

"Remember, the dollar surged when the crisis began as we still conceive the dollar as a safe heaven. We are now back to the levels just prior to the crisis," he was quoted as saying.

He said it was difficult to determine if the global financial crisis was a one-off event or a periodic breakdown of the system. "Remember that when you are dealing with a market-based system, you have innovations occurring all the time. And indeed few people realized that Edison had more failures than successes."

In his speech, Greenspan also claimed that the US financial system needed to be reformed but not replaced. He pointed out the policy of "too-big-to-fail" was not a good one and needed to be solved. "That is to me the major issue. If we do not get it right, we are going to be in terrible shape," he said.

Greenspan was appointed as the chairman of the board of governors of the Federal Reserve System for consecutive 18 years.