Greenspan: Low Corporate Long Term Investment Portfolio, Key Economic Indicator
Former Federal Reserve Chairman Alan Greenspan believes the portion of long term investments held by US corporations tells the real story about the economy. On CNBC's Squawk Box, he said that indicator was clear.
"Long term investments at corporations is at the lowest it has been since 1935," he told CNBC in an exclusive sit-down ahead of Friday's jobs report. "Corporations have been building so much liquidity in their portfolio right now, that they do not know what to do with it," the former Fed Chairman said of the short term nature in corporate investment.
Regarding employment, and especially manufacturing as a former mainstay of the American economic landscape, Greenspan thinks some of the statistics are misleading. He referred to a lot of so-called manufacturing jobs that in fact aren't what he would consider manufacturing, such as software packaging jobs. "I consider software as a service," he said, hinting that he did not see the resurgence in manufacturing that was being talked about.
He believes that line between manufacturing and services is blurring, but that still there was a dramatic shift on the life expectancy of assets being unemployed. "All of the assets being employed are less than 20-years old," which he said reinforced that long-term aversion to corporate investment.
That same aversion from the long-term commitment in favor of the short term has translated to the housing sector, Greenspan points out. He noted how Americans went from investing in houses as a wealth asset to short term leasing.
About Europe, Greenspan believes the only solution is political consolidation. "From day one in January 1999, there was an expectation that cultural differences were significant but disappear with the introduction of currencies," the former chairman said. "There was an expectation that the Italians, Spaniards and later the Greeks, would all behave as Germans. That never happened, from day one.
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