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Greenspan: Higher inflation to warrant double-digit rates in future
WASHINGTON— Former Fed Chairman Alan Greenspan predicts in a new book out Mondaythat the Fed will have to raise interest rates to double-digit levelsin coming years to thwart inflation.
Greenspan, 81, says in TheAge of Turbulence that the inflation-damping effect of globalization,which has led to lower wage pressures, inflation and interest ratesworldwide, will recede.
At some point, the flow of people intothe workforce in developing countries such as China, which has seen amovement of workers from farms into factories, will slow, leading tostronger wage pressures and prices, he says. The impact will be global.
Andthe shift "may be upon us sooner rather than later," he says. Evidence:Prices of Chinese imports coming into the USA started rising earlierthis year. That suggests that in the "next few years," inflation willbuild unless action is taken.
The Wall Street Journal firstreported details of the book on its website Friday night, saying it hadbought a copy of the book in a New York City-area bookstore. USA TODAYhad received a copy of the book to review in advance and was givenpermission to run its story ahead of the official publication Monday.
FINDMORE STORIES IN: Washington | United States | Fed | Alan Greenspan |Fed Chairman | US Federal Reserve System | Greenspan | September 11 |Criticism | Turbulence
Greenspan's prediction comes shortlybefore Fed officials are widely expected to cut interest rates for thefirst time in more than four years following turmoil in mortgagemarkets that has rippled through the entire financial sector, leadingto concerns about a credit crunch and a slowdown in the overall economy.
FedChairman Ben Bernanke and his colleagues, who meet in WashingtonTuesday, have kept their target for short-term interest rates, whichinfluence borrowing costs economywide, at 5.25% for more than a year.Greenspan's assertion that the Fed may have to double rates fromcurrent levels suggests the Fed may put itself in a bind by cuttingrates now.
Criticism of Bush over spending
In his531-page book, the former Fed chairman sharply criticizes PresidentBush for not vetoing bloated spending bills and for continuing to focuson issues, such as adding prescription drug benefits to Medicare eventhough the budget surplus of just a few years ago had disappeared anddeficits were mounting.
"In the revised world of growingdeficits, the goals were no longer entirely appropriate," Greenspansays. "He continued to pursue his presidential campaign promisesnonetheless."
Greenspan, a libertarian Republican, as he callshimself, was also disappointed that his former colleagues from the Fordadministration who were working for Bush, including Vice President DickCheney, didn't show greater fiscal discipline.
"People's ideas —and sometimes their ideals — change over the years," Greenspan writes."I was a different person than I had been when first exposed to theglitter of the White House a quarter of a century before. So were myold friends: not in personality or character, but in opinions about howthe world works and, therefore, what is important."
The Bushadministration has often attributed the deficits to the impact of the2001 recession, September 11, the war on terror and corporate scandals.
"Weare not going to apologize for spending that was required for nationalsecurity and fighting the war on terror," White House spokesman TonyFratto says.
"We respect the work that Chairman Greenspan did,"Fratto says. "We always respect his opinion. We share his views onlimiting fiscal deficits. Once we were able to help the economyrecover, it's clear that growth and limited spending are resulting indiminished deficits that will lead us to surpluses."
Greenspanalso doesn't spare Republicans in Congress, who he says were "feedingat the trough," passing expensive pet projects for their homedistricts. For this, he says, they "deserved to lose" control ofCongress to the Democrats in 2006.
"The Republicans in Congress lost their way," he says. "They swapped principle for power. They ended up with neither."
Greenspancovers a number of his pet topics, many of them familiar to those whohave been following the former chairman's speeches and testimony. Heargues U.S. primary and secondary education is slipping and must bereformed quickly to reduce income disparities between the skilled andunskilled, says trade protectionism can only hurt the economy andadvocates looser immigration policies to provide more skilled workers.
Healso frets about probably his biggest concern: The retirement of thebaby boomers and the impending fiscal problems caused by the draws onSocial Security and Medicare. He considers it an urgent problem thatneeds to be addressed soon.
A personal look at his life
Greenspanstarts the book out on September 11, 2001, winding back to hischildhood and eventually going into detail about his time at the Fed.
Heincludes details of his relationship with wife, Andrea Mitchell. Aftertheir first date he invited her back to his apartment to read aneconomics paper he had written. And they've been together ever since.
"I'mnot threatened by a powerful woman; in fact, I'm now married to one,"Greenspan says, when discussing TV newswoman Barbara Walters, whom hedated after meeting in 1975. "The most boring activity I could imaginewas going out with a vacuous date — something I learned the hard wayover my years as a bachelor."
Greenspan gives readers a lookinto a man everyone knows but few know a lot about. One million copiesof the book have been made in the initial printing.
Although hedelves into a variety of economic topics, it is the personal part thatis likely to be the most interesting, even for those who have followedthe former Fed chief for decades.
He discusses how his parents'divorce "left a big hole" in his life, even though he remained in touchwith his dad, Herbert, who was a broker on Wall Street. Later, of hisdivorce to his first wife, Joan Mitchell, Greenspan says, "I was themain problem," arguing he married a good woman for the wrong reasons.
Greenspandescribes how his mathematical abilities shone through at a young age.His mom, Rose Goldsmith, used to show off to relatives how he could doaddition and multiplication in his head, a likely uncomfortable featfor someone who as a boy was "more inclined to sit in the corner." Asan avid baseball fan, he developed his own technique of keepingbaseball box scores during the 1936 World Series.
"To this day,I can recite the lineup of Yankees starting players, complete withtheir positions and batting averages, for that World Series," he says.
Suchskills helped him succeed in later years, starting in his first job asan economist making $45 a week analyzing obscure, industrial data,later building up a successful consulting firm and then joining thegovernment.
After leading the Fed for more than 18 years,Greenspan today runs his own consulting firm, Greenspan and Associates.He continues to make speeches for six-figure fees, mainly at privategatherings. But occasionally he has roiled stock markets when hiscomments have hit the press, drawing criticism from those who say theguy just doesn't know how to retire.
That criticism will likely grow louder, with Greenspan releasing a book the day before the Fed meets to discuss interest rates.
Greenspanstarted writing The Age of Turbulence a day after he retired in January2006. He wrote the book as he did his speeches at the Fed — in longhandand mainly while sitting in the bathtub, which he does every day sincestarting the practice after a back injury in the 1960s. He says theinvention of a pen that can write in water has made it easier for hisassistants to make out the sometimes soggy papers.
USAToday
WASHINGTON— Former Fed Chairman Alan Greenspan predicts in a new book out Mondaythat the Fed will have to raise interest rates to double-digit levelsin coming years to thwart inflation.
Greenspan, 81, says in TheAge of Turbulence that the inflation-damping effect of globalization,which has led to lower wage pressures, inflation and interest ratesworldwide, will recede.
At some point, the flow of people intothe workforce in developing countries such as China, which has seen amovement of workers from farms into factories, will slow, leading tostronger wage pressures and prices, he says. The impact will be global.
Andthe shift "may be upon us sooner rather than later," he says. Evidence:Prices of Chinese imports coming into the USA started rising earlierthis year. That suggests that in the "next few years," inflation willbuild unless action is taken.
The Wall Street Journal firstreported details of the book on its website Friday night, saying it hadbought a copy of the book in a New York City-area bookstore. USA TODAYhad received a copy of the book to review in advance and was givenpermission to run its story ahead of the official publication Monday.
FINDMORE STORIES IN: Washington | United States | Fed | Alan Greenspan |Fed Chairman | US Federal Reserve System | Greenspan | September 11 |Criticism | Turbulence
Greenspan's prediction comes shortlybefore Fed officials are widely expected to cut interest rates for thefirst time in more than four years following turmoil in mortgagemarkets that has rippled through the entire financial sector, leadingto concerns about a credit crunch and a slowdown in the overall economy.
FedChairman Ben Bernanke and his colleagues, who meet in WashingtonTuesday, have kept their target for short-term interest rates, whichinfluence borrowing costs economywide, at 5.25% for more than a year.Greenspan's assertion that the Fed may have to double rates fromcurrent levels suggests the Fed may put itself in a bind by cuttingrates now.
Criticism of Bush over spending
In his531-page book, the former Fed chairman sharply criticizes PresidentBush for not vetoing bloated spending bills and for continuing to focuson issues, such as adding prescription drug benefits to Medicare eventhough the budget surplus of just a few years ago had disappeared anddeficits were mounting.
"In the revised world of growingdeficits, the goals were no longer entirely appropriate," Greenspansays. "He continued to pursue his presidential campaign promisesnonetheless."
Greenspan, a libertarian Republican, as he callshimself, was also disappointed that his former colleagues from the Fordadministration who were working for Bush, including Vice President DickCheney, didn't show greater fiscal discipline.
"People's ideas —and sometimes their ideals — change over the years," Greenspan writes."I was a different person than I had been when first exposed to theglitter of the White House a quarter of a century before. So were myold friends: not in personality or character, but in opinions about howthe world works and, therefore, what is important."
The Bushadministration has often attributed the deficits to the impact of the2001 recession, September 11, the war on terror and corporate scandals.
"Weare not going to apologize for spending that was required for nationalsecurity and fighting the war on terror," White House spokesman TonyFratto says.
"We respect the work that Chairman Greenspan did,"Fratto says. "We always respect his opinion. We share his views onlimiting fiscal deficits. Once we were able to help the economyrecover, it's clear that growth and limited spending are resulting indiminished deficits that will lead us to surpluses."
Greenspanalso doesn't spare Republicans in Congress, who he says were "feedingat the trough," passing expensive pet projects for their homedistricts. For this, he says, they "deserved to lose" control ofCongress to the Democrats in 2006.
"The Republicans in Congress lost their way," he says. "They swapped principle for power. They ended up with neither."
Greenspancovers a number of his pet topics, many of them familiar to those whohave been following the former chairman's speeches and testimony. Heargues U.S. primary and secondary education is slipping and must bereformed quickly to reduce income disparities between the skilled andunskilled, says trade protectionism can only hurt the economy andadvocates looser immigration policies to provide more skilled workers.
Healso frets about probably his biggest concern: The retirement of thebaby boomers and the impending fiscal problems caused by the draws onSocial Security and Medicare. He considers it an urgent problem thatneeds to be addressed soon.
A personal look at his life
Greenspanstarts the book out on September 11, 2001, winding back to hischildhood and eventually going into detail about his time at the Fed.
Heincludes details of his relationship with wife, Andrea Mitchell. Aftertheir first date he invited her back to his apartment to read aneconomics paper he had written. And they've been together ever since.
"I'mnot threatened by a powerful woman; in fact, I'm now married to one,"Greenspan says, when discussing TV newswoman Barbara Walters, whom hedated after meeting in 1975. "The most boring activity I could imaginewas going out with a vacuous date — something I learned the hard wayover my years as a bachelor."
Greenspan gives readers a lookinto a man everyone knows but few know a lot about. One million copiesof the book have been made in the initial printing.
Although hedelves into a variety of economic topics, it is the personal part thatis likely to be the most interesting, even for those who have followedthe former Fed chief for decades.
He discusses how his parents'divorce "left a big hole" in his life, even though he remained in touchwith his dad, Herbert, who was a broker on Wall Street. Later, of hisdivorce to his first wife, Joan Mitchell, Greenspan says, "I was themain problem," arguing he married a good woman for the wrong reasons.
Greenspandescribes how his mathematical abilities shone through at a young age.His mom, Rose Goldsmith, used to show off to relatives how he could doaddition and multiplication in his head, a likely uncomfortable featfor someone who as a boy was "more inclined to sit in the corner." Asan avid baseball fan, he developed his own technique of keepingbaseball box scores during the 1936 World Series.
"To this day,I can recite the lineup of Yankees starting players, complete withtheir positions and batting averages, for that World Series," he says.
Suchskills helped him succeed in later years, starting in his first job asan economist making $45 a week analyzing obscure, industrial data,later building up a successful consulting firm and then joining thegovernment.
After leading the Fed for more than 18 years,Greenspan today runs his own consulting firm, Greenspan and Associates.He continues to make speeches for six-figure fees, mainly at privategatherings. But occasionally he has roiled stock markets when hiscomments have hit the press, drawing criticism from those who say theguy just doesn't know how to retire.
That criticism will likely grow louder, with Greenspan releasing a book the day before the Fed meets to discuss interest rates.
Greenspanstarted writing The Age of Turbulence a day after he retired in January2006. He wrote the book as he did his speeches at the Fed — in longhandand mainly while sitting in the bathtub, which he does every day sincestarting the practice after a back injury in the 1960s. He says theinvention of a pen that can write in water has made it easier for hisassistants to make out the sometimes soggy papers.
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