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2011-07-02

Greenspan Says QE Ineffective, Greece Will Still Default

Alan Greenspan provided his latest thoughts on a variety of economic topics, including quantitative easing and the potential for a Greek default.

The former Federal Reserve Chairman stated in a CNBC interview that the Fed’s quantitative easing programs under Ben Bernanke have done little to increase lending and stimulate the U.S. economy. ”There is no evidence that huge inflow of money into the system basically worked. It obviously had some effect on the exchange rate and the exchange rate was a critical issue in export expansion. Aside from that, I am ill-aware of anything that really worked. Not only QE2 but QE1.”

Going forward, Greenspan said he “would be surprised if there was a QE3″ due to the damaging effects it could have on the value of the U.S. dollar.

Greenspan went on to discuss the sovereign debt crisis in Greece, noting that a Greek default is eventually likely. A default would substantially weaken the profitability of U.S. companies, because of their large economic commitments to Europe, which holds a significant portion of Greek debt.

The former Fed Chairman also talked about the U.S. deficit, predicting that Congress will not reach an agreement on raising the debt ceiling by the August 2 deadline.

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