Greenspan: U.S. Needs to Cut Budget Gap WASHINGTON (Reuters) - U.S. Federal Reserve Chairman Alan Greenspan said on Friday the United States should cut its budget gap to foster a more balanced pattern of global trade and avoid painful economic consequences. "Current account deficits, even large ones, have been defused without significant consequences, (but) we cannot become complacent," Greenspan said in remarks prepared for delivery to a European bankers conference in Frankfurt. A copy of his text was made available in Washington. Greenspan said that cutting the U.S. budget deficit, which has hit record levels in dollar terms, would be the most effective U.S. policy response to help rein in the record shortfall in the U.S. current account, a broad measure of American trade with the rest of the world. "Alternative approaches to reducing our current account imbalance by reducing domestic investment or inducing recession to suppress consumption obviously are not constructive long-term proposals," he said. The Fed chief said while there were only "limited indications" the United States was running into resistance funding its record trade shortfall, an eventual desire by foreign investors to cut the risk of holding too many dollars may lead them to diversify away from U.S. assets or demand higher rates of return. "It seems persuasive that, given the size of the U.S. current account deficit, a diminished appetite for adding to dollar balances must occur at some point," Greenspan said. "This situation suggests that international investors will eventually adjust their accumulation of dollar assets or, alternatively, seek higher dollar returns to offset concentration risk, elevating the cost of financing of the U.S. current account deficit and rendering it increasingly less tenable," he warned. Quelle "Greenspan: U.S. Needs to Cut Budget Gap" : reuters.com Main page for "Greenspan: U.S. Needs to Cut Budget Gap"