Aug 282017

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By G. Steven Bray

Former Federal Reserve Chair Alan Greenspan has a warning. Interest rates are much too low, and he thinks they’re likely to move higher and quickly.

In a CNBC interview, Greenspan said he thinks the bond market is experiencing a bubble with long-term rates abnormally low. The low rates are the result of Fed taking short-term rates to near zero during the financial crisis and keeping them there for years.

The Fed has hiked short-term rates 4 times since then, but long-term rates remain near record lows. Analysts cite many reasons for this including political and economic uncertainty and, most importantly, persistently low inflation.

Greenspan says he doesn’t know when rates will start to rise, but he thinks it will be soon, and once they start rising, he thinks they will rise rapidly, which could put the rest of the economy at risk.