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Greenspan calls for deficit control: the United States may soon reach the borrowing ceiling
Source: | Author:finance-94 | Publish time: 2019-05-02 | 138 Views | Share:
Greenspan, the former chairman of the Federal Reserve, pointed out that the Fed could face higher borrowing costs because of its inflated debt and called for a "structural shift" in fiscal policy to curb lending.
Greenspan, the former chairman of the Federal Reserve, pointed out that the Fed could face higher borrowing costs because of its inflated debt and called for a "structural shift" in fiscal policy to curb lending.           
"The view that the United States has a strong ability to borrow is misleading," Greenspan said in an article on the Wall Street Journal website. "The problem of rising long-term bond interest rates may come unexpectedly," such as the 4-month surge in 1979-80.           
Greenspan disputed the fear that deficit reduction would put economic recovery at risk, and he joined the debate among global policymakers about how to get out of the stimulus measures taken during the financial crisis as soon as possible. U.S. Treasury Secretary Timothy Geithner said this month that while "medium-term" fiscal austerity measures are needed, governments must strengthen the recovery of individual demand.            "The fiscal policies of the United States and most developed countries in the world need to be structured," Greenspan pointed out. "Incremental change is not enough."            Deficit Control           
If the U.S. government "controls" the sale of U.S. Treasuries, the pressure on capital markets will ease, he said.            "The federal government is currently shouldering the next 30 years of commitment, but the debt is difficult to fill in in the actual period," Greenspan said. He pointed out that in recent months, as a result of the European debt crisis, U.S. Treasury yields have benefited from hedging demand, which may not be sustainable.           
At 12:11 p.m. Tokyo time, the yield on the benchmark 10-year Treasury bond was 3.20%, lower than this year's high of 4.01% in April. In June 2007, before the financial crisis, the yield was as high as 5.32%. Greenspan pointed out that in the past 18 months, federal public debt has surged from $5.5 trillion to $8.6 trillion, but yields remain low.           
Demand is close to U.S. government debt and the shift away from euro-denominated debt is "temporary," he said. "The U.S. economy cannot withstand major policy errors or underestimate the impact of the financial crisis."