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Greenspan Warns On Debt (and Inflation)


24.Nov.2018

Over the week end, former Fed Chairman in the David Rubinstein show lashed out at D. Trump’s policies calling his tariffs policies “insane”, mostly working as an excise tax. He said that the next recession will be driven by “dramatically” rising debt. He said that adding USD1trn to the stock of debt meant, when combined with the current demographics, means that the US Debt/GDP is going to accelerate “in the immediate future”. Growth is not going to pay for it, he said, flagging the 3% growth forecast of the administration as unrealistic. He noted that capital expenditure is what determines productivity gains and that he sees very little of it. Referring to tight labor markets, he warned this should increase inflation and that we could be heading for a stagflationary period, similar to the 80’s. When asked what he would say to President Trump asking him how to solve the entitlements problem, his answer was … “Go somewhere else”. Crude oil accelerated its losses on Friday, dropping another 6% as a supply overhang (mostly due to higher US production and last minute exemptions exceptions brought to Iran’s sanctions after most producers readied to increase supply), rising concerns about the global economy and D. Trump thanking Saudi Arabia for lower oil prices and asking for more… Over the week end, D. Trump tweeted: “So great that lower oil prices are falling…It is like a big Tax cut, to our other good economic news. Inflation down (are you listening Fed)?”. 

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