Greenspan Warns on Economy: "We’re In Trouble"

According to former Federal Reserve Chair Alan Greenspan, the current monetary policy environment carries numerous risks and is “counterproductive” when it comes to restoring the global economy.  He stated his opinion that negative interest would lead to "misuse of capital."  One of the fundamental problems of accommodative policies that Greenspan mentioned is the lack of business investment which is also a reflection of caution on the part of businesses concerned about the outlook.  His comments directed specifically toward the US economy underlined the dangers of entitlement spending and how it is shifting investment sentiment and further devastating productivity as private capital remains on the sidelines awaiting greater clarity on the future of policy.  This comes amid the rebound in Fed Funds futures to back above 50%, implying a stronger probability of at least one additional rate hike before the end of 2016.

Fourth quarter GDP numbers announced by the Australian Bureau of Statistics overnight showed a stronger than anticipated figure with growth printing at 0.60% compared to estimates 0.40%.  Although well below the third quarter figures which were upwardly revised to 1.10%, policymakers will be forced to focus on stimulating business investment and the export economy in the coming quarters to see output expansion accelerate.  According to the latest report, the primary driver of GDP growth in the latest reading was private consumption expenditures which rose by 0.70%.  However, the -1.90% decline in private investment combined with the contracting manufacturing sector continued to drag on output despite the fact that the economy grew at a healthy 3.00% annualized pace, beating expectations of 2.50% handedly.  The Australian Dollar surged on the GDP publication, with AUDUSD rising as high as 0.7244 before pulling back modestly.