WASHINGTON (CNNMoney.com) -- Massive government intervention to save the economy is to blame for the lagging recovery, Former Federal Reserve Chairman Alan Greenspan said Tuesday.
Greenspan argued for less government intervention to get the recovery rolling and businesses investing in equipment and plants.
"What we need to do now is to calm down; let things move by themselves," he said at a forum at the Council of Foreign Relations. "And indeed the rate of activism has decreased significantly and the ratio of capital flow has inched back up."
Some economists blame Greenspan, who served as Fed chair from 1987 to 2006, for keeping interest rates too low for too long and for failing to sound the alarm that Wall Street was over-leveraged and running wild.
But with Republicans in control of the House, Greenspan's views are starting to gain an audience again. Many Republicans share his opinion that intervention has created uncertainty and deterred private sector investing.
Greenspan targeted deficits created by the $787 billion 2009 Recovery Act as the main culprit behind the current sputtering recovery.
Why are deficits to blame?
Greenspan said the Treasury Department's borrowing "crowds out" companies from finding similarly low interest rates to borrow funds for capital investments on equipment and plants.
At the same time, he acknowledged that America's biggest and most-trusted companies aren't having trouble finding good interest rates. But smaller companies, he said, are struggling.
"Microsoft is not being crowded out," Greenspan said. "It's those who find an 8% or 9% interest rate, which are required of junk bonds and small businesses, which is too high."
He said he estimates that government borrowing is effectively reducing long-term capital investment by one fifth.
Answer by foreverb3 at 8:23 PM on Mar. 17, 2011
Answer by janet116 at 9:39 PM on Mar. 17, 2011
NO- I agree with Janet! he is backpedaling, big time.
Answer by Sisteract at 1:00 AM on Mar. 18, 2011
Answer by lovinangels at 1:17 AM on Mar. 18, 2011
Answer by sweet-a-kins at 8:28 AM on Mar. 18, 2011
Answer by itsmesteph11 at 10:33 AM on Mar. 18, 2011
Answer by janet116 at 12:20 PM on Mar. 18, 2011