Former Fed chair Alan Greenspan blasphemously warned a year ago of an “imminent crisis”:
“This is the worst period, I recall since I’ve been in public service. There’s nothing like it, including the crisis – remember October 19th, 1987, when the Dow went down by a record amount 23 percent? That I thought was the bottom of all potential problems. This has a corrosive effect that will not go away. I’d love to find something positive to say.”
Adding that fundamentally it is not so much an issue of immigration, or even economics, but unsustainable welfare spending, or as Greenspan puts it, “entitlements.”
The issue is essentially that entitlements are legal issues. They have nothing to do with economics. You reach a certain age or you are ill or something of that nature and you are entitled to certain expenditures out of the budget without any reference to how it’s going to be funded. Where the productivity levels are now, we are lucky to get something even close to two percent annual growth rate. That annual growth rate of two percent is not adequate to finance the existing needs.
I don’t know how it’s going to resolve, but there’s going to be a crisis.
This is one of the great problems of democracy. It goes back to the founding fathers. How do you handle a situation like this? And it’s very troublesome, but eventually you get things like Margaret Thatcher showing up in Britain. Their situation is far worse than ours. And what she did is she turned it all around essentially by, as I remember it, the miners were going to strike and she decided – she knew they were going to strike. Since at that point, the government owned these coal mines, she built up a huge inventory so that when they went on strike, there was enough coal in Britain so that eventually the whole union structure collapsed. She fundamentally changed Britain to this day. The fact that we are doing so well in the E.U. is not altogether clear that it is the E.U. or whether it was Margaret Thatcher.
