Former Federal Reserve Chairman Alan Greenspan told CNBC on Thursday the political structure has been in chaos for years, and fixing the economy will take tough political judgments.
“I think we’re in a period, because of fiscal reasons, for a sluggish economic growth rate for a while, but superimposed on that are very early signs of a pickup in inflation,” Greenspan said on “Squawk Box.”“My concern now is actually stagflation.”
“That pickup in inflation is going to move profit margins up temporarily. But it’s a false dawn,” he said.
Fiscal policy, which has been gridlocked for years in Washington, needs to be “one, two, and three” on the list of reforms to jump-start the economy, said Greenspan. The emphasis on the Fed’s monetary policy should be fourth on the list, he added.
The soaring costs of entitlement programs, including Social Security and Medicare, must be reigned in, said Greenspan. “If we don’t bring that under control, everything else we’re doing is irrelevant.”
Greenspan also said he’d “love to see Dodd-Frank disappear.” He called the regulations that were designed to reduce banking risk in the wake of the 2008 financial crisis a “disastrous mistake.”
The 90-year-old economist led the Federal Reserve for 19 years under four presidents, from Ronald Reagan through George W. Bush.
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