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To: Ron McKinnon who wrote (50970)	2/11/2004 1:58:45 PM
From: E.J. Neitz Jr	Read Replies (1) \| Respond to of 53068

Most important part of greenspan testimony: >>>>>But he also said the optimism could turn out to be misplaced if any of a number of risks derail the economy's prospects. Among the risks he listed were a sharp increase in oil and natural gas prices and the possibility that investors will become spooked by the soaring budget deficit. Last week, the administration projected that this year's deficit will hit an all-time high in dollar terms of $521 billion. "Should investors become significantly more doubtful that the Congress will take the necessary fiscal measures, an appreciable backup in long-term interest rates is possible," said Mr. Greenspan. That view is at odds with the Bush administration, which has argued that the deficits pose no immediate threat of pushing interest rates higher. Mr. Greenspan devoted a considerable part of his testimony to urging Congress to get control of the soaring deficits, which the administration is pledging to cut in half over the next five years. Mr. Greenspan said the need to start taking action is critical in light of the country's soaring current account deficit, which hit $550 billion last year, requiring the U.S. to borrow that amount from foreigners during a period when the dollar is weakening in value. "Given the already substantial accumulation of dollar-denominated debt, foreign investors, both private and official, may become less willing to absorb ever-growing claims on U.S. residents," he said. Many private economists are concerned that if foreigners suddenly become spooked and start dumping their U.S. holdings, stock prices could plunge and interest rates soar..<<<<WSJ excerpt