Former Fed Chairman Alan Greenspan said today on Bloomberg TV that the recent rise in Treasury yields may be a signal that interest rates are heading higher.
The yield on 10-year Treasury notes was 3.86 percent at 12:19 p.m. in New York, up from 3.69 percent at the end of last week.
Some quotes from the interview:
“I’m very much concerned about the fiscal situation,” said Greenspan, 84, who headed the central bank from 1987 to 2006. An increase in long-term interest rates “will make the housing recovery very difficult to implement and put a dampening on capital investment as well.”
In the past there was "a large buffer between the level of our federal debt and our capacity to borrow,” he said. “That’s narrowing. And I’m finding it very difficult to look into the future and not worry about that.”
Greenspan said last year that a consumption tax like the European VAT may be the way to narrow the deficit. Today he expressed concern about that approach: “I’m not convinced by any means that we can succeed in stabilizing this long-term outlook strictly from a value-added tax."
So there you have it. Pearls of wisdom from the former Fed chief. I wonder how Bernanke will respond. Greenspan is sure working hard to rehabilitate his image.