Alan Greenspan bashes crony capitalism, predicts double-digit inflation

Former Federal Reserve Chairman Alan Greenspan is on a tour of his new book “The Map and The Territory.” During this time, he has delivered a series of statements and passages in his book are beginning to be published in the news media. Essentially, these remarks don’t seem to provide the United States economy with much confidence.

In an interview with the BBC, Greenspan touched upon an array of issues. One of the topics Greenspan discussed was the possibility of the U.S. facing another financial crisis that the nation supposedly nearly faced last week when lawmakers refused to raise the debt ceiling. Although Greenspan noted he sympathizes with the Tea Party wing of the Republican Party, he stated that the group’s tactics are “undemocratic.”

One of the most problematic issues in the nation today is crony capitalism, according to Greenspan. He explained that it is rather ubiquitous in China and Russia, but it is starting to become a troubling matter in the U.S. and the United Kingdom.

“Crony capitalism is essentially a condition in which… public officials are giving favours to people in the private sector in payment of political favours,” said Greenspan. “I am beginning to worry that we are starting in that direction.”

Inflation

Writing in his new book, Greenspan warned that as the central bank continues to expand its balance sheet, especially with incoming Chair Janet Yellen hinting at increasing it, it could very well lead to immense inflation.

“It is easy to contemplate price acceleration, with today’s Federal Reserve balances unchanged, ranging from three percent per annum to double digits over the next five to 10 years,” he stated in his book.

According to Greenspan, he is concerned because each time the central bank purchases a bond, it pays the bank that sells the bond by creating money and placing it into an account that the bank keeps at the Fed. Inflation would then become rampant as it starts to go through the economy.

Financial crisis

In the book, he shows his ignorance because he writes that no one predicted the economic collapse. Of course, Greenspan doesn’t mention the various Austrians who predicted the financial crisis nor does he give a hat tip to the Austrian business cycle. Here’s a video to suggest that at least one person knew a crisis was coming.