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Video: Greenspan on America’s Looming Political Crisis — the Deficit

Written by Gary North on February 10, 2015

Alan Greenspan has given an interview on the federal government’s budgetary impasse. Neither political party is willing to face it. But it must be faced at some point.

He did not mention the obvious: the Federal Reserve’s role in delaying this crisis. He delayed it. Bernanke delayed it. Yellen delayed it. The FED has the ability to buy 100% of the deficit every year. Of course, at some point, this results in hyperinflation. Then there has to be a new currency. But this has not happened in the West to the currency of any major nation, except after World War I: Germany and Austria: 1921-23.

Hyperinflation does nothing to solve the three killer expenditures: Social Security, Medicare, and Medicaid. After the hyperinflation is over, these will remain . . . for 75 more years. That’s why hyperinflation is highly unlikely. At some point, the FED will say: “No more bailouts. Balance the budget.”

At that point, FED policy will create a recession on a massive scale — far worse than 2009.

Greenspan does not mention this, either. He talks of a political crisis, but he does not mention the economic crisis that will cause the political crisis.

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