Alan Greenspan: 'Nervous' Bond Prices Are Too High

The transcript discusses the potential equity bubbles in history and draws parallels with current bond market speculation. It explores the implications of stagflation on interest rates and financial stability, highlighting the historical constancy of human time preference. Concerns over the bond market's stability are raised, particularly with negative term premiums. The discussion extends to negative interest rates and currency implications, emphasizing the limits of arbitrage. Finally, the transcript addresses currency volatility and its impact on the global economy, pointing to significant uncertainty and political challenges in addressing entitlements.

What does the historical stability of interest rates suggest about human time preference?

• It is influenced by short-term trends.

• It has significantly changed over time.

• It remains largely unchanged.

• It is unpredictable.

What is a key concern when the bond term premium turns negative?

• Bond prices are expected to rise.

• Interest rates are expected to increase.

• Investors are not demanding compensation for holding bonds.

• Investors demand higher compensation.

Why might Swiss interest rates turn negative?

• To stabilize the Swiss economy.

• To increase the spread between currencies.

• To maintain the spread during global deflation.

• To attract more foreign investment.

What is a limitation of currency arbitrage when interest rates are negative?

• Unlimited currency storage capacity.

• Lack of available currencies.

• Limited amount of currency that can be held.

• High transaction costs.

What is a major cause of recent volatility in foreign exchange rates?

• Consistent interest rate policies.

• Predictable political decisions.

• Significant uncertainty in the global economy.

• Stable global economic conditions.

What political issue in the United States contributes to economic uncertainty?

• Military spending.

• Tax policies.

• Entitlements problem.

• Trade agreements.

What is the potential consequence of not addressing the entitlements problem in the US?

• Improved political consensus.

• Increased financial stability.

• Continued economic growth.

• Destabilization of the financial system.