Former Federal Reserve Chairman Alan Greenspan said on Thursday that both private investors and central banks were shifting away from the U.S. dollar and toward the euro.
"We're beginning to see some move from the dollar to the euro, both from the private sector ... but also from monetary authorities and central banks," Greenspan told a conference sponsored by the Commercial Finance Association.
His comments pushed the dollar down, a sign that Greenspan, who retired from the U.S. central bank in January, still holds some sway in financial markets.
As he had done repeatedly when he led the central bank, Greenspan said it was imperative for the United States to resist protectionist pressures that could make an unwinding of the large U.S. current account trade gap economically painful.
"We'll get to the point at some point that willingness to finance it will slow, and if you can't finance it, it won't happen," Greenspan said of the broad trade measure.
He said, however, that if the economy remained flexible, the adjustment "should have very little effect on production and capacity."
Greenspan warned, however, that if the United States threw up barriers to isolate itself from the pressures of globalization, "the adjustment process could be a little bit more problematic."
Original Source