Politics is getting in the way of people: Greenspan
There is huge uncertainty predicting anything during a pandemic.
Former Federal Reserve chairman Alan Greenspan says trying to forecast where the coronavirus is going at this stage is little more than a guess. He says It might be possible to get back to normal by next spring, but only if the virus’s spread is controlled and stays that way.
“I’m not convinced at all that we have enough information to know how to deal with this type of problem,” Greenspan says in an interview with CNN, adding that there could be unintended consequences for society. Excerpts from the interview:
There is huge uncertainty predicting anything during a pandemic. I just wanted to ask you whether you’ve adjusted your calculations or views on the economic recovery in the United States as a result of the vaccines. What’s your thinking?
Well, I’ve never seen a particular situation during my professional experience, anything like this, trying to forecast, or where the virus is going, in this particular stage is a very little more than a guess. And we have to adjust our forecasting and our policies accordingly. This is a very complex forecasting procedure system, largely because the issue of a virus is a very rare phenomenon, once in 100 years.
How long do you think it takes the US economy to recover based on all the challenges we’re facing at this moment?
It depends on how quickly they get an operating solution to the virus problem. I would scarcely say we’re flying blind. We know a great deal and we know certainly that if we could bring the virus under control and keep it that way, it is perfectly credible that those who are forecasting that will be back to normal by the spring of next year, if not earlier I’m guessing, I mean, they’re most sensible judgments, but it’s still, I would not consider it the most likely occurrence. In a situation like this, you always have to say, what could go wrong? The major part of the solution here is going to be to get us back to where we were. And that could take a long time and I’m not convinced at all that we have enough information to know how to deal with this type of problem and without consequences negative to the overall structure of the society.
Define what you mean by detrimental impact to the structure of society.
Well, the outgoing president, if I may use a very politically hot term, was engaged in a number of things which I could have done without.
Is the message that you have to do more to protect the economy than less in the absence of perfect information?
The odd answer to that question is we don’t know yet. That’s perfectly credible to me. That will do a lot of things, each one of which seems credible, desirable, and then find out at the end of the day that while he may have appeared that way by itself, when you combine them, it works quite negatively for the economy as a whole.
In the face of all this uncertainty, a pandemic, the politics, as you mentioned, can stock markets continue to go higher?
I think the stock markets are going higher because the approach on the issue of the virus is making progress. Since Pfizer for example, put out its new product, things have changed in the market. And I think you’ll find that the major moves in the Dow reflect change in the quality and the probability of success of what products they come up with and how long it takes to implement them.
Has the Federal Reserve got the policies right at this moment based on what we’re seeing in the underlying economy?
Jay Powell said once again this week that we can do more, we may need to do more.
They do a splendid job. I know how their system works, obviously in great detail. I would be very hesitant in second guessing them because I know their procedures of analysis, types of people they have and the time frames they use. The same ones I would.
You know what the toolkit looks like. Are they out of ammunition based on what you know about their powers or do they have more that they can do?
They have more of that they can do. But the question is, should they use it?
And if I ask you whether they should or not?
I wouldn’t wait around for an explicit very unequivocal answer for me on that question.
I know, but it’s my job to try. Let’s talk about fiscal policy. Would you like to see US Congress do more?
They’ve battled for months and not agree on a second financial aid package. But there are many millions of Americans that remain out of work and are struggling.
Well, I thought that the various different things that have been raised as potential fiscal policy make a good deal of sense to me, why we don’t implement them is another question. I think (House Speaker Nancy) Pelosi has a particular set of ideas to confront the problems right now in front, seem quite credible to me. All they have to do is implement them.
We’ve forgotten the meaning of the word compromise. Politics is getting in the way of people.
I would argue that that is the case.
What should be Joe Biden’s number one priority, set aside the coronavirus task force and controlling the virus as best we can, what should be his number one economic priority in your mind, Alan?
What you just mentioned is an economic issue. And that is number one as it should be.
Beyond that, what you do if you’re operating a fiscal policy is adjust to events as they occur. I don’t think you put into place things prior to when they were necessary. So I’m not concerned about the timing question. It is very easy to pass a large bill through both houses of Congress with the president’s signature if there is a general view that needs to be done.
Do you trust them? Do you trust policymakers?
Depends who they are. Some I do, some I don’t.
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