Greenspan Says Interest Rates Could Double to Thwart Inflation

This is pretty scary stuff:

WASHINGTON — Former Fed Chairman Alan Greenspan predicts in a new book out Monday that the Fed will have to raise interest rates to double-digit levels in coming years to thwart inflation. Greenspan, 81, says in The Age of Turbulence that the inflation-damping effect of globalization, which has led to lower wage pressures, inflation and interest rates worldwide, will recede. At some point, the flow of people into the workforce in developing countries such as China, which has seen a movement of workers from farms into factories, will slow, leading to stronger wage pressures and prices, he says. The impact will be global. And the shift "may be upon us sooner rather than later," he says. Evidence: Prices of Chinese imports coming into the USA started rising earlier this year. That suggests that in the "next few years," inflation will build unless action is taken.

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I wonder what the market will think of the Maestro's comments; and/or if they care ... if the US interest rate is going to double digits anytime in next half decade that would be calamitous for a nation which lives on credit.

I do agree on the inflation issues in China being 'exported' to the rest of the world as I have written numerous times, but was not thinking anywhere along the lines of 10%+ interest rates.

So when the ex-Fed Chief said things the market likes, the market goes up - will this news simply be ignored and brushed aside ? If people think it has any credence, we could be talking about a serious repricing of assets across the board. And such predictions right ahead of a meeting in which it's generally assumed Fed will cut rates, no less. Maestro loves the attention....

Greenspan has some interesting political comments as well in the article, if you care to read...

Very interesting... very interesting.