Delaying on measures to tackle the deficit could thrust the country
into a bond market crisis that would spur a double-dip recession,
former Federal Reserve Chairman Alan Greenspan said on "Meet the Press"
"Look, I think something equivalent to what Erskine Bowles and Alan Simpson put out is going to be passed by the Congress," he said. "The only question is, is it before or after a bond market crisis?"
Greenspan said he is "hoping that we have enough sense to realize that we've got to resolve this issue before it gets forced upon us." His fear is that the long-term deficit could "spook" the bond market "to a point where long-term interest and mortgage rates move up very sharply."
"If that happens, that will cause the double dip," he said.
Even though there are some signals the economy is improving, Greenspan said, businesses are failing to make key investments because they are uncertain about the future. He said this is true to an extent that he has never seen before.
"The business sector is concerned is that business is highly uncertain about the future in a way which I've never seen it before and a way in which the data suggests has never, in fact, been so depressed," he said.
Businesses showing an unwillingness to invest in long-term assets, according to Greenspan.
"Unlike previous recoveries when, for example, we would be getting very significant pick ups in building, residential, nonresidential, in a sense, longer-term assets, we're not getting that today," he said. "It's a big hole in the economy."
He pointed out that constructing a building, for instance, is a 20 or 30-year investment. Businesses are unlikely to begin making longer-term investments until some of the question marks disappear, according to Greenspan.
"Unless and until we can begin to lift that pall of uncertainty, it is very difficult to see people reaching out into the longer term," he said.
Still, Greenspan said he doesn't see another crash around the corner, and said a double dip recession in unlikely.
"There's very little evidence of any deterioration that suggests we're about to have a double dip, as they call it. And in fact, if there's any evidence at all, we are actually picking up some," he said.
"We are in a position where we are moving forward largely because the rest of the world is moving forward," he said.