12.03.2005
Greenspan Warns of 'Painful' Adjustments for Economy (USATODAY.com)
Posted 12/2/2005 9:43 AM Updated 12/2/2005 11:57 AM
By Martin Crutsinger, AP Economics Writer
WASHINGTON — Federal Reserve Chairman Alan Greenspan expressed concerns Friday that America's failure to deal with its exploding budget deficit and worldwide efforts to erect trade barriers could disrupt the global economy.
Speaking at an economic conference in London, Greenspan said that so far the United States has had no problem financing its current account trade deficit, which last year hit a record $668 billion, because of the flexibility of the American economy.
But he said such flexibility would be threatened by rising protectionism, which would increase barriers to the flow of goods and investments across the U.S. border. He also worried about the harm that could be done if the United States and other nations do not get their budget deficits under control.
"If ... the pernicious drift toward fiscal instability in the United States and elsewhere is not arrested and is compounded by a protectionist reversal of globalization, the adjustment process could be quite painful for the world economy," Greenspan said in his prepared remarks, which were released in Washington.
The London speech represented the second warning Greenspan delivered Friday on the threats posed by rising budget deficits. In an earlier speech, he had said that there could be severe consequences for the U.S. economy if policymakers do not attack a federal budget deficit that is projected to soar with baby boomer retirements.
(More ... USATODAY.com - Greenspan warns of 'painful' adjustments for economy) ¶ 12:43
By Martin Crutsinger, AP Economics Writer
WASHINGTON — Federal Reserve Chairman Alan Greenspan expressed concerns Friday that America's failure to deal with its exploding budget deficit and worldwide efforts to erect trade barriers could disrupt the global economy.
Speaking at an economic conference in London, Greenspan said that so far the United States has had no problem financing its current account trade deficit, which last year hit a record $668 billion, because of the flexibility of the American economy.
But he said such flexibility would be threatened by rising protectionism, which would increase barriers to the flow of goods and investments across the U.S. border. He also worried about the harm that could be done if the United States and other nations do not get their budget deficits under control.
"If ... the pernicious drift toward fiscal instability in the United States and elsewhere is not arrested and is compounded by a protectionist reversal of globalization, the adjustment process could be quite painful for the world economy," Greenspan said in his prepared remarks, which were released in Washington.
The London speech represented the second warning Greenspan delivered Friday on the threats posed by rising budget deficits. In an earlier speech, he had said that there could be severe consequences for the U.S. economy if policymakers do not attack a federal budget deficit that is projected to soar with baby boomer retirements.
(More ... USATODAY.com - Greenspan warns of 'painful' adjustments for economy) ¶ 12:43
