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Montevideo, September 18th 2018 - 15:45 UTC

Zero probability of US default, “we can always print money to pay any debt”

Wednesday, August 10th 2011 - 19:33 UTC
Full article 11 comments
Former Fed chairman downplayed risk of double-dip recession Former Fed chairman downplayed risk of double-dip recession

Former Federal Reserve Chairman Alan Greenspan downplayed the risk of a double-dip recession in the United States saying the domestic economy was in better shape compared to its European peers.

Greenspan also said the US debt is not a credit rating issue because there's zero probability of a US default: the United States can pay any debt it has because we can always print money to do that”.

A double-dip recession “depends on Europe, not the United States,” Greenspan told NBC television “Meet the Press.” “The United States was actually doing relatively well -- sluggish, but going forward -- until Italy ran into trouble.”

The US economy stumbled badly in the first half of 2011 and came dangerously close to contracting in the January-March period, raising fears that the economy was sliding back into recession.

Those fears were calmed somewhat last week when a debt deal was agreed before the August 2 deadline as well as data showing that employers added 117,000 jobs in July. But Standard & Poor's downgrade of the country's top-notch “AAA” credit rating late on Friday to “AA+” could hurt the recovery.

“With all of this bickering going on, the economy is slowing down” Greenspan said. “You can see it in all the data. I don't see a double-dip, but I do see it slowing down”.

Europe, which buys a quarter of US exports and houses the operations of many American companies, would determine the course of the US economy's recovery, Greenspan said.

European leaders are struggling to contain a sovereign debt crisis, which has spread to Italy, the Euro zone's third-largest economy, and is causing turmoil in global financial markets.

Greenspan said Italy's troubles could contribute to destabilizing the European and US economies.

“When Italy showed signs of significant weakness in selling its bonds... it created a massive problem within Europe because Italy is a very large country that ... indeed cannot be bailed out,” he said. “And that's what's causing our problem.”

Greenspan said despite the S&P downgrade, U.S. Treasury bonds, unlike Italian bonds, were still a safe investment.

“This is not an issue of credit rating. The United States can pay any debt it has because it can always print money to do that. There's zero probability of default,” he said.

”What I think the S&P (downgrade) did was to hit a nerve. ... It's hit the self-esteem of the United States, the psyche. And it's having a much profounder effect than I conceived could happen.”
 

Categories: Economy, United States.

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  • briton

    far to many giving advice after the horse has bolted,
    The United States can pay any debt it has because we can always print money to do that”.
    so why don’t you just print say 12 trillion dollars,
    And while your at it, can you print at least 2 trillion dollars or what ever our debt is now,

    After all if its just a matter of printing money, why not print say 1,000 trillion dollars and save the world,
    , am I wrong or where does this guy get of, just printing money all the time wont help. sooner or later someone has to pay for this, surely , ??

    Aug 10th, 2011 - 08:10 pm 0
  • Rufus

    But it worked so well in other places, like Zimbabwe.

    I saw a picture of a hundred trillion Zimbabwean dollar bill (worth about $0.004). Just think, they'd only have to print an American one and the deficit would be wiped out forevermore.

    Or we can all just be very relieved that he's the EX-Federal Reserve chairman.

    Aug 10th, 2011 - 10:08 pm 0
  • Fido Dido

    “Or we can all just be very relieved that he's the EX-Federal Reserve chairman.”

    No, because his buddy Ben Shalom Bernanke does exactly what he says, QE1, QE2, QE3, and more to come. Oh let's not forget, both agree that though they keep an eye on the price of Gold, it doesn't matter, US dollar is as “good” as Gold. Yeah right.

    Aug 11th, 2011 - 12:42 am 0
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