Greenspan on the Hill

I was surprised to hear Alan Greenspan spend so much time yesterday talking about long-term interest rates. He seems puzzled why long-term rates are still so low.

This decline in long-term rates has occurred against the backdrop of generally firm U.S. economic growth, a continued boost to inflation from higher energy prices, and fiscal pressures associated with the fast approaching retirement of the baby-boom generation. The drop in long-term rates is especially surprising given the increase in the federal funds rate over the same period. Such a pattern is clearly without precedent in our recent experience.

He thinks the reason is that, across the world, people are saving too much and not investing enough. The clearly wants high rates, and I think the market will oblige.

Posted by on July 21st, 2005 at 2:31 pm


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