Alan Greenspan is on CNBC this morning, and he’s talking debts and deficits. He’s been banging the drum on this issue for a while, so it’s not surprising that that’s his big focus this morning, especially as it dovetails with the vote from the President’s Deficit Commission.
But his view is a real head scratcher. He says if the US didn’t have Europe’s debt problems, then the US economy would be in much better shape than it is today.
The US doesn’t have European debt problems. Europe’s problems are a function of having a unified currency, one central bank, and multiple sovereign Treasuries. The individual countries can’t weaken their currencies like the US can or Japan can, which has WAY more sovereign debt.
Remember, the US doesn’t have a pile of dollar sitting somewhere to pay off its debt. Ireland, on the other hand, does have a pile of euros, and it can run out in a way that’s totally different from the US.
That the former Fed Chair doesn’t get this might explain something about the economy after his stewardship.
Here’s Greenspan on the U.S. economy and the euro.
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