High US Deficits Could Spark Bond Crises

[discocrisco01]

WASHINGTON (Reuters) - The United States must move to rein in its massive budget deficits or it faces the risk of a bond market crisis, former Federal Reserve Chairman Alan Greenspan said on Sunday.

"We've got to resolve this issue," Greenspan said of the ballooning U.S. debt levels.

He spoke about the issue as a panel, chaired by former White House chief of staff Erskine Bowles and former U.S. Senator Alan Simpson, is due to deliver a report on debt and deficits by December 1.

A draft report made public last week offered a series of politically tough tax and spending choices that would seek to reduce the debt by $4 trillion by 2020.

The report received a lukewarm reception from some politicians and outright condemnation by others, including House of Representatives Speaker Nancy Pelosi, who pronounced the ideas "simply unacceptable."

Greenspan, who spoke on NBC's "Meet the Press," said he believed "something equivalent to what Bowles and Simpson put out is going to be approved by Congress. But the only question is whether it is before or after a crisis in the bond market."

He said the risk is that the deficit, which hit $1.3 trillion this year, could spook the bond market. That would result in long-term interest rates moving up rapidly and could lead to a double-dip recession.

(Reporting by Caren Bohan and Richard Cowan



Read more: http://www.portfolio.com/business-news/reuters/2010/11/14/high-us-deficits-could-spark-bond-crisis-greenspan#ixzz15H35ixSH
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I guess that autersity is solution to this problem. Everyone wants to go the route of Greece or the UK.

Or the reality is that we are chasing the boogie man. It is imaginary problem that we created and we are missing the real problem out of tunnel vision. Is Krugman right that the subject policy would deflation and led to more deficits because it does nothing to address to income equity or repair the demand-side of the economy

The prevailing wisdom is that the paying down the national deficit is going to generate economic growth. However, my problem with the current strategy is does nothing to create investment or focuses toward repairing a demand-side economy. Should we accept a economy with very weak growth and letting the plutocracy gow just so that this austerity would help us to achieve a surplus?

Is the really a move done by the banskers to prop up asset prices of equities instead of forcing real investment in the economy?

[fasttense]

1. And we listen to GreenSpin why???????

He has been absolutely wrong about most everything and he doesn't even have a doctorate. Why should we listen now?

[Barack_America]

3. Because he's Ayn Rand's chosen boy?

[Barack_America]

2. These issues rarely arise when the middle class is getting their share of the wealth.

Funny how this fact never seems to come up when the fear-mongers start calling for massive cuts to benefits programs.

Middle class folks actually pay their taxes AND put money back into the economy via spending.

[ProgressiveEconomist]

4. Greenspan green-lit Dubya's huge "tax cuts" at the time, even though he of all people knew

there was no "surplus". He was the author of Reagan's "Social Security Commission" report in 1983 that's led to $2.5 trillion of Treasury debt to the Social Security Trust Fund so far. Just as baby-boomer retirement loomed and time for Treasury to start repaying that debt neared, Greenspan allowed the last of positive FICA cash flow to be transferred disproportionately to the wealthiest.

Back in 1983, Greenspan saw to it that the securities Treasury has given the SS trustees for the past generation of FICA cash flow could not be sold on the open market. IMO, this was a conscious plan to achieve Greenspan's stated goal before he served as Reagan's campaign economic adviser: Poor people should pay MORE in taxes.

David Greogory should be ashamed of himself for giving Greesnpan the kind of platform he got today, with Gingrich, a Vanity Fair author who said Obama's stimulus hadn't worked, and only DLC chair Harold Ford on the "left". IMO Gregory SHOULD have asked Greenspan about his long-term role in engineering today's financial crisis through draining workers' paychecks of TRILLIONS so the wealthy could blow up huge asset bubbles with workers' money.

[discocrisco01]

5. Harold Ford Was The Left

So you are telling me that Harold Ford was the "left". Harold Ford is not the "left" and is a centrist. It is okay to put him on when you have three-person panel that compromises the left, right, and center. But to use Harold Ford to spokeperson of liberalism was a bad programming decision.

You want somebody to debate Newt and Alex Greenspan and who know his/her facts. It makes for more interesting television watching when Newt and somebody on the left who knows his facts than having bland corporate centrist on the network. People are just going turn off the show because it was not interesting. You have five hundred channels competing for people's attention and you get Harold Ford to be your panelist without a voice from the left. Bad idea. Bad ratings.

Are people MSM are that scared of the Left to hear our views? It is because we are right and they are wrong. How about free-flow of ideas and information? A free-wheeling debate is more likely to result in better compromise than bland centrist corporatist show.

I do not really care about MSM shows except CNN shows. At least CNN puts on a quality show, but the MSM are just not that interesting. They are hangover of prior era.