david: when you are a young boy, did you say you wanted to be chairman of the federal reserve board? you were called the maestro for being the maestro of the economy. you made your key decisions in the bathtub in the morning. where you surprised by how much criticism you received? an: no one foresaw the 20 -- 2018 quite -- crisis. would you fix your type please? -- just leave it this way.

david: i do not consider myself a journalist. no one else would consider myself a journalist. i began to take over the life of the interviewer even though i took -- i have a day job. how do you define leadership? what is it that makes somebody tech? -- tick? galbraith says that conventional wisdom is almost always wrong. the conventional wisdom is that the u.s. economy and strong. your view is that it may not be accurate. think it is a different form of stagflation. it has some of the characteristics of buoyancy, but erosion that is an will disable the economy unless

it is corrected. david: do you see any movement to solve the deficit or debt problem? alan: a lot of talk, but no realistic movement. right now we are creating a year,t of $1 trillion a and that is being added net to the stock of debt. as a percentage of deet -- of gdp is rising, and the demographics are such that that will accelerate in the immediate future. david: if you could wave a magic thisand help reduce deficit, what would you do? alan: the question is what is the cause of it? on both the expenditure and the tax side. i fully approve of the tax cuts that were made, but only in the

andext that it is funded led to a very significant cut in the marginal tax rate. you cannot have a tax cut without finding the revenue elsewhere, or you run into problems. david: the new bal -- the new bill that was passed in the first year president trump's administration that will produce 3% or more growth for the for seeable future. do you think that is realistic? alan: certainly not as a consequence of the tax cut. give a buoyancy, and we are still feeling some of it. enough toere near offset the deficit. there is no way around this without coming to grips with the expenditure side. david: president trump called you arend said, alan, a great former chairman of the

federal reserve, i want you to solve social security and medicare. what would you do? alan: go elsewhere. david: because you think it is too difficult? alan: politically we are caught in a terrible problem. --id: let us talk another about another issue, which is productivity. your point is that we do not have the product timothy -- the productivity that we should have because we are borrowing too much money. alan: precisely, it is the capital investment that determines what productivity will be. there are equations that show with net capital stock that has built up in some measures of educational efficiency. we are not doing it. he washarry truman, when listening to his economic

advisor, said please bring me a one-handed economist. direct question , can you tell me when the next recession is going to happen? alan: some time. david: we have had recessions every seven years since world war ii. alan: it is going to be driven by the fact that debt is rising dramatically, there is going to be some curtailment's occurring and it will feel -- feed on itself. is something that when youin the 1980's, have a situation where both unemployment and inflation were high. it was something which the original model said that was not possible. we are going into that type of period now, if you look at all the guidelines. david: if you are worried that we are going to go into

recession, do you invest your money in a certain way to protect against that? alan: you cannot protect everything. veryannot forecast accurately. right now, we have been at a long-termextreme, interest rates and they are beginning to move up and will continue to move up. that is going to cause a turn in the market. are you worried about inflation right now? alan: i'm beginning to see the first signs of it. we are seeing it in the tightening of the labor markets. it is very tight now. we are finally beginning to see ,verage wages rise, and clearly, there is no productivity behind it.

all productivity increase has averaged under 1% a year. it is a historic low. but europenly we, and everybody else. we are getting into a system that has no outcome that is equilibrium other than inflation and low productivity growth. saysis not something that we are going to have long-term acceleration and growth. david: what would you recommend that we do? basic problem is fundamentally on the expenditure side. say, 90%, i would entitlements. are legislated payments to certain groups irrespective of

what they are paying into funds. we have overdone it. the question is, if we have overdone it, why not pull it back? that is the economic conclusion, it is not a credible political analogy. david: let me shift to your own personal life and career. when you are a young boy, did you say i wanted to be chairman of the federal reserve board? alan: i could barely pronounce the world -- the words at the time. my aspiration was to be a musician. i went to juilliard. david: my instrument was what? alan: i played the clarinet, tenor saxophone, and bass clarinet. david: you were not good enough -- to make your professional career out of that? i could have.

i sat next to a 15-year-old by the name of stanley. we both had the same saxophone teacher. i said, this kid is terrific. i said to myself, if you cannot be this good, why do you want to be second best? david: why didn't you tell him to go into economics and get rid of him? alan: that is a good idea. david: you left juilliard and went to nyu? certain product -- i was surprised, i did not think i would be a good student. i was not sure how well i would do in math in college. it turns out that i was good enough to graduate summa cum laude. in shop andwo b's jim.

i had a's in everything else. david: you were called the maestro. did you think that people were giving you too much credit for being such a great maestro of the economy? alan: i was getting much too much credit for what actually was going on. , do not worry about it, we'll come out the other side. ♪

toit is my intention nominate dr. alan greenspan as the chairman of the federal reserve. david: i want to say that i'm deeply grateful the part -- >> i want to say that i'm deeply grateful to the president for this opportunity. nyu,: you graduate from you have given up your music career, what did you do when you graduated? alan: first of all, i went to

the national industrial conference board. for the first time, i went into the business world. i was not all that interested in it here and i found myself -- i was not interested in it, but i found myself fascinated. at 22, i was writing articles for the magazine, and i was getting fascinated. i was getting quoted in "the new york times." david: you openly became a well-known consultant on wall street. on the side, you get to know a very famous writer and -- a very famous writer. what was the appeal? her heroes. i read her books, and i was caught up in the science that you cannot have

anything rational about human emotions. i had an argument about uncertainty with iran, -- ann ryand ever since i met her. i said human values are irrational. she then proceeded to take me apart piece by piece, showing me the contradictions in my position. david: did you think that she was smarter than you? alan: she demonstrated that she was. we became very close. good: you built a reputation on wall street, because richard nixon asked you to serve as the head of the council of economic advisers. to do so, but

then something happened to president nixon, that is right? ford nixon resigned, and became president. david: ultimately, you got to be close to president ford. ford loss the election -- lost the election to jimmy carter, and you went back to wall street , is that right? ultimately, president reagan says to you, why do you not come in and be the chairman of the federal reserve board? did you meet with reagan before you accepted the offer? alan: i met with him quite often during his campaign. i was part of the reagan for and i got topaign, work with him fairly closely. david: you take the job and hold it for 18 or 19 years? alan: 18 and a half. david: you are given a lot of

credibility for the u.s. economy being in good shape. were givingk people you too much credit? or do you think they were right? wait, it will not last. washington is basically related to what it is that you do. have 100% control of what it is that you happens, you get caught by the fluctuations. my major concern, and i was quickly aware of it, is that i was getting too much of the credit for what actually was going on. said, do not worry about it, it will come out on the other side. years, peoplee would often say, let us photograph alan greenspan walking into the federal reserve building. if he has a fat set of books

with him, that means he is about to make a historical decision, if you has nothing, no historical decision. is there any truth? it was a briefcase. it depended on whether or not my wife made me lunch. david: what about the theory that you major key decisions in the bathtub in the morning? because you had a bad back, you would take a bath in the morning and you would write notes to people and it would come back with watermarks. did you make the decisions there? alan: of course, i was running speeches in the bathtub. the back is obviously still a problem. i was told to lie on my back full-time for six weeks by an orthopedist.

i ran my business looking up the ceiling. david: you step down and everybody in the world wants to get your advice on things. were you shocked? shocked.as i was shocked by the price on my first book. i was shocked for a number of years. well, andngs went then the economy collapses. and then all of a son, people are saying it was alan greenspan's fault because he should've anticipated this. fair, andnk that was are you surprised about the criticism that you received? alan: i did not think it was fair, and i never expected that it was fair. i anticipated that it would happen, but not when. -- no one saw the 2008 crisis. what i put in my second book was how the imf and federal reserve

missed it. you go down a whole series of major forecasting. david: everybody got it wrong. the purpose was, i did not find it a surprise. you cannot have a crisis of that nature that is not a surprise. back onhen you look your term as federal reserve chair, would you do any different in light of events that happens after you left? alan: not that i'm aware of. david: when you testify in front of congress, you are well known for not being precise. was that on purpose? alan: yes. it was a general rule at the time that the federal reserve did not make public what it was going to do. we do now, but not back then.

ways canion was, what i figure around answering certain questions or not answering them? up a vocabulary that no one could quite understand, or were too ashamed that they do not understand. david: why do you think it is that we are not as creative as we were before in coming up with new companies? alan: there is more to it than the issue of a simple capitalist . we are getting more and more regulation. >> is continued devotion to public service, it should be a cause of celebration in this country and around the world. it is something for which i'm very grateful. mr. chairman. consequencess have , and it is important for us to

try and determine in advance what those consequences are. that is a challenge which i must say to you, at -- as i said to the president before, it is like eating peanuts. you keep doing it and you never get tired because the future is always ultimately unknowable. ♪

david: let us talk about your book, "capitalism in america." one of the key points is creative destruction. it means that entrepreneurs start new companies, but you are worried that we are not doing that as much as -- as much now. that we are not as

creative as we were before? alan: there is more to it than strictly the issue of a simple capitalist. we are getting more and more regulation. i am waiting to and whatonsequences of the current administration to regulation are doing, because what we show in the book are examples of the extraordinary --adening of controls, broadening of controls. florist or something related, which has no effect on human life or health, you need a

permit. that never was the case. david: your point is that there is too much regulation? alan: what is remarkable is that we went up and down. you would've thought that, after the 1930's, that capitalism was shot, gone, and not coming back. ironically, it got resurrected during world war ii, where it was obvious that the private won the war.at today, the relation of capital is not unequivocal as it used to be. the relation in the taxation and the culture is not what it used to be. of yourhe main point

book is to say this is a unique capitalist system. alan: that is exactly right. david: you are in your 90's. did your parents live to be this age? lived to herer mid-90's. david: the success other than good genes, what would it -- what would you contributed to? well, exercising, reading productivity data reports? alan: reading productivity data reports. david: one of your great accomplishments is that you have been married to andrea mitchell, an nbc correspondent. anything you would like to say about your marriage? alan: it has been wonderful. david: does she give you advice on economic matters and you give her advice on media matters? alan: she gives me advice on

everything. sometimes i take it. met a lot ofve famous people, presidents, heads of state of other countries, secretaries of state. who are some of the most impressive people you are privileged to meet? alan: the two smartest got andached, bill clinton richard nixon. i would say, on a strictly iq had other flaws obviously. david: do you have any regrets about your career and you you regret not going into private equity? alan: i am an economist making money has never been my interest. it was never my real purpose. want tof you ever

reinvent yourself as a private equity person, let me know. you could be good at it. alan: after a run of economics. my problem is that the economy keeps fascinating me. david: thank you very much for taking the time. ♪

♪ >> from bloomberg headquarters in new york and london, here are tom keene and francine lacqua. tom: good day to all of you are on the bloomberg world. tom keene new york, francine lacqua in london. one of our favorite moments of the year, talking about the year past and looking forward to next year.