JACKSON HOLE, Wyo., Aug. 26 (UPI) -- Federal Reserve Chairman Alan Greenspan used a speech in Wyoming Friday to warn against protectionism and investor over-confidence.
Greenspan said a lack of progress in international trade talks could be particularly hard on the United States.
"The developing protectionism regarding trade and our reluctance to place fiscal policy on a more sustainable path are threatening what may well be our most valued policy asset: The increased flexibility of our economy, which has fostered our extraordinary resilience to shocks."
Flexibility for Greenspan means the ability of capital to flow to its most lucrative destinations, including outside the country. He attributed that flexibility to the United States' ability to sustain huge budget and trade deficits.
Also, noting a recent steep rise in the ratio of household net worth to disposable income, Greenspan said it reflects investors' willingness to reflect lower returns for higher risks.
"Such an increase in market value is too often viewed by market participants as structural and permanent. To some extent, those higher values may be reflecting the increased flexibility and resilience of our economy. But what they perceive as newly abundant liquidity can readily disappear."
