Alan Greenspan

degree in economics. After time at the Conference Board in his own economic consulting firm, President Ronald Reagan nominated Greenspan to succeed Paul Volker as FED Chair, and he was confirmed in August of nineteen eighties seven. Greenspan was subsequently renominated as FED chair by President Clinton with both George W. And H. W. Bush after being replaced by Ben Bernaki

in two thousand six. Greenspan founded an economic consulting firm and wrote a memoir entitled The Age of Turbulence Adventures in a New World. Greenspan has a new book on now called Capitalism in America, a History, which he wrote with Financial Times reporter Adrian Wooldridge. He recently sat down with Carlisle Group co founder David Rubinstein. They spoke on

David Rubinstein's Bloomberg television program Peer to Peer Conversations. John Kenneth Galbraith once famously said that conventional wisdom is almost always wrong. Now, the conventional wisdom today is that the U S economy is very strong. I think your view is that might not be accurate. Is that correct? You don't think it's that strong? Well, I think it's a

different form of what we call stagflation. It had some of the characteristics of buoyancy, but underneath it is an erosion which ultimately will disable the economy unless it's corrected. Do you see any movement to solve let's say, the deficit and debt problem. I'd say a lot of talk,

but no realistic movement. And right now we're creating a deficit of a trillion dollars a year and uh that is being added net to the stock of debt, and debt as a percent of GDP is rising very rapidly, and the demographics of the age groups are such is that that's going to accelerate in the immediate future. So if you could wave a magic wand and help reduce

this deficit and debt, what would you do well. The question is what's the cause of it, And the cause of it is essentially on both the expenditure and on the tax side. I actually fully approve of the tax cuts that were made, but only in the context that it is funded. Otherwords, we went to a very significant cut in the marginal corporate tax rate. But you can't have a tax cut without finding the revenues elsewhere or

you running the problems. So the tax cut bill that was passed in the first year of President Trump's administration by the Congress said, in effect, that will produce three or more growth for the foreseeable future. Do you think three annualized growth is realistic over the next five or ten years. No, certainly not as a consequence of the tax cut. The tax cut actually did get a buoyancy, and we're still feeling some of it, but it's nowhere near enough to offset the actual deficit. So there's no

way around us without coming to grips with the expenditure side. Okay, So President Trump called you up and said, uh, Alan, you're a great u former Chairmber of the Federal Reserve. I need some advice. I wanted to solve the SOUCH security problem and the Medicare medicaid problem. What would you tell him to do else go elsewhere because you think it's too difficult. I think politically we're caught the terrible problem. So let's talk about another issue that you've talked about,

which is productivity. Your point is that we don't have the productivity that we should have, in part because we're borrowed so much money, and that's squeezing out the money that would be otherwise available for productivity increases. Precisely, it's the capital investment which ultimately determines what productivity will be

in factor. Our equations show that you can explain it all with the care net capital stock that's built up in business, plus uh uh, some measures of educational efficiency. But we're not doing it now. Harry Truman, when he was listening to his economic advisors, said, you know, please bring me a one handed economist, because they always said, well, on the one hand, this and the other hand this, and he got tired of that. So, um, let me ask you a direct question. Can you tell me when

the next recession is going to happen? Sometimes? Sometimes, but we've had recessions every seven years on average since World War Two. It's going to be driven by the fact that debt is rising dramatically and there's going to be some curtailments occurring from that, and it's going to feed on itself. What I'm saying, we talk about stagflation. Stagflation is something that happened in when you had a situation where both unemployment and inflation we're high, something which the

original Keynesian model said was not possible. And we're going into that type of period now. If you look at all the guide, if you're worried that we're going to go into recession at some point, um you do you invest your money in a certain way to protect against that. You can't protect everything. And the point is you can't

forecast a very very accurately. Right now, we've been at the extreme period extremely low real long term interest rates, and they're beginning now to move up, will continue to move up, and that is going to cause the basic turn in the market. Are you worried about inflation right now? I think I'm beginning to see the first signs of it. We're seeing it basically in the tightening of the labor

markets first, which as you know, getting very tight. Now we'll be getting finally to see average wages rise, and clearly there's no productivity behind it. All productivity increase in the last ten years is averaged under one percent a year. It's a historic low. Uh not, I might add, it's not over your we it's Europe and everybody else as well.

You're getting into a system now which has no outcome that's and equilibrium other than inflation and low productivity growth, and that is not something which says we're going to have a long term acceleration. So what would you recommend that we do to solve the problems that you pointed out? Well, the basic problem is fundamentally on the expenditure side, so

that the issue is if I would say ninety entitlements. Now, these are as you know, basically legislated payments to certain groups irrespective of what they're paying into funds, and we've we've overdone it. Now, the question obviously is, well, if we've overdone it, why don't we just pull it back? That is the economic conclusion. It is not a credible political Now let me shift for a moment. If I could to your own personal life and career when you were a young boy, did you say I want to

be chairman of the Federals aboard. That's the last thing. I could barely pronounce the words. At the time. My aspiration was to be a musician, so I went to Juilliard for a few years. Your instrument was what I played, the uh clarinet, ten of saxophone based clarinet, a little flute. But for all of those, you weren't good at any of them. To be a really professional, make your whole

career at that, Let's put it this way. I could have, but I said, I'll only be clasppy because I sat next to a fifteen year old by the name of Stanley Gets when I was sixteen. We both had the same saxophone teacher, and I said, oh my god, this kid is terrific. And I said to myself, Uh, if you can't be this could Why do you want to be second best? Why didn't you tell him he should go into economics and get rid of him. I should have done that, I thought that I never thought of it.

That would have been a good idea. So you ultimately left Juilliard and you went to n y U. Yes, well, I actually is very surprised. I didn't think I was going to be a good student. I knew I did well in math in high school. I did not. It wasn't absolutely sure how all I would do in college. It turns out that I don't know that I graduate

summer come Louder. But I had only two bees in shop and Jim shopping, Jim so so He's and everything else, And there was no one more surprised than I. So you graduate summer come Loudy from n y U. H you've given up your music career. What did you do when you graduated? Uh? Well, first of all, I went to the National Industrial Conference Board for the first time. I went into the business world, and I wasn't really

all that interested in it, and found myself fascinated. And I, at a fairly young age, was like twenty two, was writing articles for the Conference Board magazine, and I was fascinated by I was getting quoted in the New York Times. Okay, a very early age. So the New York Times is quoting you, and you're in your twenties, and then you ultimately became an fact that a well known, ultimately well known consultant on Wall Street and on the side, you become close to or get to know a very famous

writer named Iron Rand. And what was the appeal of her to you? What fascinated was her heroes, And when I read her books found it. And then Atlas Rugged, I was caught up in that science thing which said basically that, uh, you didn't have anything rational about human emotions. And I had an argument about uncertainty behind Rand when ever since I met her, and I kept saying that human values are irrational, you know, there not conceptually put together.

And she then proceeded to take me apart, piece by piece, showing the contradictions in my position. But did you think she was smarter than you? She demonstrated she was smarter than and we actually became very close. You obviously built a very good reputation in Wall Street because Richard Nixon, President United States, UM asked you to serve as the head of the Council of Economic Advisors, and you actually had agreed to do so. But then something happened to

President Nixon. Is that right? Something I've forgotten what it was. Then Nixon resigned and Ford, as vice president, became president. Ultimately, you got to be close to President Ford. But Ford lost the election to my former boss, Jimmy Carter in nineteen seventy six and you went back to Wall Street. Is that right? You're pretty prominent now as the former head of the Council Economic Advisors and then ultimately President Reagan says to you, why don't you come in and

be the chairman of the federals Ave Board. Did you meet with Reagan before you accepted the offer? Well, I actually had met with him quite often during his campaign. I was part of the Reagan for President campaign staff, so that stuff. I got to work with them fairly closely. So you take the job, and you held the job for eighteen or nineteen years, eighteen and a half years. You were called by many of the maestro and you were given a lot of credibility for the U. S

economy being in such a good shap. Did you ever think that people were giving you too much credit for being such a great maestro of the economy or do you think they were pretty right? I said, wait, it won't last. Uh, you can't. Popularity in Washington is basically related to what it is you do, and if you have no if you don't have a hundred percent control of what it is that happens as a consequence that you're doing you get caught by the fluctuations up and down.

My major concern, and I was cutely aware of it, as I was getting much too credit, too much of the credit for what actually was going on, And I said, don't worry about it. It'll come out on the other side. In those years, um, people often uh would say, let's photograph Alan Greenspan walking into the Federal Reserve building. If he has a big fat um set of books with him or papers, that means he's about to make a historic decision. If he has nothing very much, it means

no historic decision. So was that there any truth to the validity of your carrying a lot of things into the It was my brief, briefcase, depending whether my wife made me lunch. So it really was nothing to that theory. Well everybody knew that, of course. What about the theory that you made your key decisions in the bathtub in

the morning because you had a bad back. You would take a bath every morning, and that you would write notes to people and it would come back kind of with a little water marks on it because you were doing this in the bathtub. Did you make good decisions there? Do you think? Oh? Of course, And I was. I was writing speeches in the bathtub. Uh. The backwards is still bought. Obviously still a problem. Was quitely on my back full time for six weeks by an orthopedist. I

ran my business looking up at the sailing. All right, so you're step down and all of a sudden everybody in the world wants to get your advice on things. Was it a shock or you actually anticipated that would happen. I was shocked. I was shocked that the price that they bit up on my first book. I was shocked by the fees I was getting U uh pretty much

for number of years. So things went very well, and then the economy collapses, and so all of a sudden, are people were saying, well, it was Alan Greenspan's fault because he should have anticipated this. Did you think that was fair? And were you surprised by how much criticism you perceived at that point? One. I did not think it was fair, but I never expected it to be fair. And Uh, I anticipated that was going to happen. I just didn't know exactly when. But nobody forecast the two

thousand and eight crisis. One of the things I put in a second book, I wrote, UH was how the I M F missed it, the deserve missed it. Uh, you go down the whole series of the major forecasting. Everybody got wrong, let's say every every I mean. But the purpose was I didn't find that surprise. You can't have a crisis of that nature that that is not a surprise. So you look back on your term as the Federals chair, would you have done anything different in

light of events that happened after you left? Would you have done something differently enough that I'm aware of now when you testify in Congress? You were famous for not being that precise in terms of being clear clear. Let's say you were used what I would call fed speak because you were off your skating a little bit? Was that on purpose? In other words? It was a general rule uh at that time that the Federals did not make public what it was going to do. We do now,

but not not back then. And so the question was what ways could I figure around answering certain questions or not answering them? And I had I worked up means to vote vocabulary, which M quite understand. How we're too ashamed to say that, don't understand? All right? So it was on purpose? Why do you think it is that we're not as creative as we were before? And for any coming up with new companies and so forth. There's more to it than just strictly the issue of a

simple capitalist thing. We're getting more and more regulation. So let's talk a moment now about your book, Capitalism in America. One of the key points of your book is that we have something in the United States called what you've called creative destruction. Creative destruction essentially means that entrepreneurs starting new companies. But you're worried, according to the book, that we're not doing that as much. Now. Is that right? And why do you think it is that we're not

as creative as we were before? For any coming up with new companies and so forth. There's more to it than just strictly the issue of the simple capitalist thing.

We're getting more and more regulation. In fact, the one thing I'm I'm waiting to see the consequences of what the current administration's deregulation operations are doing, because, ah, what we show in the book is examples of the extraordinary broadening of controls, which ah, I mean people listening seems strange to use this example, but to be a florist or something related which has no effect on human life or health. W you need you needed, you need a permit.

That never was the case. So your point is there's too much regulation. What is remarkable about the United States? We went up and down? What would have thought that after the nineteen thirties, UH, that capitalism was shot gone, No, not coming back, And ironically it got resurrected during World War Two, where it was very obvious at the private sector was what essentially won the war. And UH today the ownership of capital is not as unequivocal as it

used to be. The regulation and the UH taxation and the culture is not what it used to. The main point of your book, I thought was to say, we've had a uni capitalist system, but maybe there's some dangers that what we've made us so unique aren't going to be available in the future. Is that exactly right? So you're now in your nineties and UM, did your parents lived to be this age or you have long genes or mother? So the success other than good genes is

what would you attribute to? It's? Um, eating well, exercising a lot, UH, reading a lot of productivity data reports. What is it that you attribute your longevity product reading a lot of productivity data reports is probably What's it? One of your great accomplishments we haven't talked about is you've been married to Andrew Mitchell for quite some time, a NBC correspondent, among other things she's achieved. So anything you would like to say about your marriage to Andrew Mitchell,

It's been wonderful, okay? And does she give you advice when economic matters? Ever you give her vital media matters? Ever advice on everything? Okay? Sometimes? I take it. You've met a lot of famous people, UH Presidents United States, heads of state from other countries, UH, finance secretaries, ministers, secretaries of treasury, secretaries of state. Who would you say among the most impressive people you or privileged to meet, let's say the too smartest, too smartest were got impeached,

Bill Clinton and Richard Nixon. I mean they, I would say, on a strictly i Q basis, those two, but they had other flaws obviously. Do you ever have any regrets about anything you did in your career and do you ever regret not going into private equity? Well, I'm an economist making money, per se. It's never been my interest. It turned out that a good full out rule, but

it was never my real purpose. We ever want to rein it yourself as a private equity person, let me know you could, you know, learn this business and still be very good in it. After I run out of economics, my problem basically, economy keeps fascinating me.