Deficit Worries Could Trigger a Bond Market Crisis, Greenspan Says

Deficit Worries Could Trigger a Bond Market Crisis, Alan Greenspan Says The U.S. must act to rein in its massive budget deficits or face the risk of a bond market crisis, former Federal Reserve Chairman Alan Greenspan said on NBC on Sunday, Reuters reported.

"We've got to resolve this issue before it gets forced upon us," Greenspan said. The deficit, which hit $1.3 trillion this year, may begin to frighten the bond market, he said. As that happens, interest rates would move up, which could undermine the recovery, causing the dreaded double-dip recession.

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Greenspan's words echo loudly against the backdrop of an expected panel report on debt and deficits due out by Dec. 1. A draft report made public last week offered a list of tough tax and spending moves that would aim to reduce the debt by $4 trillion by 2020.

Politicians in general were unenthusiastic about the suggestions, some even outright condemning them. But Greenspan said he believed "something equivalent" to what was recommended would eventually be approved by Congress.

"The only question is," he said, "is it before or after a bond market crisis?"
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