ZeroHedge.com<\/p>\n
On Friday afternoon, after the shocking Brexit referendum, while being interviewed by CNBC Alan Greenspan stunned his hosts<\/a>when he said that things are about as bad as he has ever seen.<\/p>\n “This is the worst period, I recall since I’ve been in public service. There’s nothing like it, including the crisis \u2014 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. <\/strong>This has a corrosive effect that will not go away. I’d love to find something positive to say.”<\/p>\n Strangely enough, he was not refering to the British exodus but to America’s own economic troubles.<\/p>\n Today, Greenspan was on Bloomberg Surveillance where in an extensive<\/a>, 30 minutes interview he was urged to give his take on the British referendum outcome. According to Greenspan, David Cameron miscalculated and made a \u201cterrible mistake\u201d in holding a referendum. That decision led to a \u201cterrible outcome in all respects,\u201d Greenspan said. “It didn\u2019t have to happen.\u201d Greenspan then noted that as a result of Brexit, “we are in very early days a crisis which has got a way to go”, <\/strong>and point to Scotland which he said will likely have another referendum on its own, predicting the vote would be successful, and Northern Ireland would \u201cprobably\u201d go the same way.<\/p>\n His remarks then centered on the Eurozone which he defined as a truly \u201cvulnerable institution,\u201d primarily due to Greece\u2019s inclusion in its structure. \u201cGet Greece out. They\u2019re a toxic liability sitting in the middle of a very important economic zone.” Ironically, the same Eurozone has spent countless hours doing everything in its power to show just how unbreakable the union is by preserving Greece, while it took the UK just one overnight session to break away. Luckily the UK was not part of the monetary union or else it would be game over.<\/p>\n But speaking of crises, Greenspan warned that fundamentally it is not so much an issue of immigration, or even economics, but unsustainable welfare spending, or as Greenspan puts it, “entitlements.”<\/p>\n The issue is essentially that entitlements are legal issues.\u00a0 They have nothing to do with economics.\u00a0 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.\u00a0 Where the productivity levels are now, we are lucky to get something even close to two percent annual growth rate.\u00a0 That annual growth rate of two percent is not adequate to finance the existing needs.<\/p>\n <\/p>\n I don’t know how it’s going to resolve, but there’s going to be a crisis.<\/strong><\/p>\n <\/p>\n This is one of the great problems of democracy.\u00a0 It goes back to the founding fathers.\u00a0 How do you handle a situation like this?\u00a0 And it’s very troublesome, but eventually you get things like Margaret Thatcher showing up in Britain.\u00a0 Their situation is far worse than ours.\u00a0 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.\u00a0 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.\u00a0 She fundamentally changed Britain to this day.\u00a0 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.<\/p><\/blockquote>\n When asked if “we need an accident of history” <\/strong>to address this, Greenspan replied “Probably. <\/strong>In the United States, social benefits, which is the more generic term, or entitlements, are considered the third rail of American politics.\u00a0 You touch them and you lose.\u00a0 Now, that is a general view.\u00a0 Republicans don’t want to touch it.\u00a0 Democrats don’t want to touch it.\u00a0 They don’t even want to talk about.\u00a0 This is what the election should be all about in the United States.\u00a0 You will never hear one word from either side.\u00a0 ”<\/p>\n\n