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CNBC Exclusive: CNBC Transcript: CNBC’s Sara Eisen Speaks with Former Federal Reserve Chairman Alan Greenspan on CNBC’s “Squawk Alley” Today

WHEN: Today, Thursday, April 14th

WHERE: CNBC's "Squawk Alley"

Following is the unofficial transcript of a CNBC EXCLUSIVE interview with former Federal Reserve Chairman Alan Greenspan and Sara Eisen today, Thursday, April 14thon CNBC's "Squawk Alley" (M-F, 11AM-12PM ET) from the IMF/World Bank Meeting in Washington D.C. Following is a link to the video on CNBC.com: http://video.cnbc.com/gallery/?video=3000509675&play=1.

All references must be sourced to CNBC.

KAYLA TAUSCHE: THE IMF WORLD BANK MEETING IS UNDERWAY IN WASHINGTON, DC. OPENING THE WEEK WITH A DOWNGRADE IN ITS FORECAST FOR WORLD ECONOMIC GROWTH. BUT WHAT DOES THIS MEAN FOR THE GLOBAL ECONOMIC LANDSCAPE? SARA EISEN HAS HAD QUITE A LINEUP THROUGHOUT THE MORNING AND SHE JOINS US NOW FROM THE MEETING WITH FORMER FED CHAIRMAN ALAN GREENSPAN. SARA?

SARA EISEN: ALL OF THE ALL-STARS ARE HERE TODAY, KAYLA. YES, THANK YOU. I AM HERE WITH CHAIRMAN GREENSPAN. ALWAYS A PLEASURE. NICE TO SEE YOU.

ALAN GREENSPAN: THANK YOU. MY PLEASURE TO BE HERE.

EISEN: SO WE JUST HEARD THAT THE IMF DOWNGRADED GLOBAL GROWTH. THEY ALSO DOWNGRADED THE U.S. GROWTH FORECAST FOR THIS YEAR. YOU'VE GOT A THEORY ON WHAT IS HOLDING US BACK – THE U.S. ECONOMY. WHY WE CANNOT SPRING FORWARD. WHAT IS IT?

GREENSPAN: WELL, I THINK YOU FIRST HAVE TO LOOK AT WHERE THE PROBLEMS ARE. AND THEY IMMEDIATELY COME OUT WHEN YOU BEGIN TO EXAMINE OUTPUT PER HOUR OR PRODUCTIVITY. GOING ACROSS THE INTERNATIONAL SPECTRUM WITH REMARKABLY FEW EXCEPTIONS, EVERY SINGLE MAJOR COUNTRY – DEVELOPED COUNTRY AND A NUMBER OF THE DEVELOPING COUNTRIES ARE SAGGING BADLY AND INDEED, THE UNITED STATES – THE LAST FIVE YEARS PRODUCTIVITY GROWTH RATE HAS BEEN 5.5%.

EISEN: IT'S WEAK.

GREENSPAN: DEPENDING ON HOW YOU MEASURE IT. AND THAT'S BASICALLY TRUE OF EVERYBODY. IN SHORT, I JUST DID AN ANALYSIS OF ALL OF THE MAJOR COUNTRIES. AND OF 31 I PICKED UP, TWO-THIRDS HAD A PRODUCTIVITY GROWTH RATE OF LESS THAN 1% OVER THE PAST FIVE YEARS.

EISEN: IS THIS RELATED TO THE FACT THAT CORPORATE INVESTMENT HAS BEEN LOW? WAGES HAVE BEEN TOO LOW. COMPANIES ARE NOT SPENDING ENOUGH. PROFITS ARE AT SUCH A DECLINE FOR THE THIRD QUARTER IN A ROW. WHAT'S CAUSING ALL OF THAT?

GREENSPAN: IT'S BASICALLY THE ISSUE OF CORPORATE PROFITABILITY AS IT'S SEEN IN THE FUTURE AND AS A RESULT, WHAT YOU'RE SEEING IS CORPORATE INVESTMENT HAS COME DOWN VERY SIGNIFICANTLY AS A PERCENT OF GDP EVERYWHERE. AND WHEN CORPORATE INVESTMENT FALLS AND PRODUCTIVITY SAGS, THE QUESTION IS WHY DID CORPORATE INVESTMENT DECLINE? WELL IF YOU LOOK AT IT IN A BOOKKEEPING SENSE, IT'S BECAUSE GROSS DOMESTIC SAVINGS EVERYWHERE ACROSS THE SPECTRUM, POLITICAL SPECTRUM, HAS BEEN SEVERELY UNDERCUT BY SOCIAL BENEFIT INCREASES IN VIRTUALLY EVERY SINGLE MAJOR COUNTRY.

EISEN: YOU'RE TALKING ABOUT ENTITLEMENT—WE NEED TO CUT ENTITLEMENTS?

GREENSPAN: WELL THE REASON BASICALLY IS THAT THE DEMOGRAPHICS – THE POPULATIONS ARE AGING. I MEAN, JAPAN'S NUMBERS GO FAIRLY SHARPLY.

EISEN: SO THIS IS A POLITICAL PROBLEM.

GREENSPAN: IT'S FUNDAMENTALLY A POLITICAL PROBLEM. IT'S A POLITICAL PROBLEM, BUT MOST THINGS ARE POLITICAL PROBLEMS. THIS IS A VERY DIFFICULT PROBLEM TO SOLVE.

EISEN: WELL, I KNOW YOU LEAVE THE POLITICAL COVERAGE TO YOUR WIFE, BUT WHO IS GOING TO SOLVE THIS PROBLEM?

GREENSPAN: MY WIFE.

EISEN: SERIOUSLY, ARE ANY OTHER CANDIDATES TALKING SERIOUSLY ABOUT THE RIGHT ISSUES?

GREENSPAN: I THINK THE QUESTION IS – WE COULD HAVE SOLVED THE PROBLEM IN THE UNITED STATES WITH SIMPSON BOWLES A NUMBER OF YEARS AGO. THAT WAS A VERY CLEVER WAY OF COMING AT CONTROLLING THE DEFICIT WHICH IS REALLY WHAT THE PROBLEM ULTIMATELY IS. AND WITH BIPARTISAN SUPPORT. I THINK IT COULD HAVE PASSED EASILY – NOT EASILY, BUT IT COULD HAVE PASSED WHEN IT WAS INTRODUCED BY SIMPSON AND BOWLES.

EISEN: WE'RE A LONG WAY AWAY FROM THAT.

GREENSPAN: PRECISELY. SO WE MISSED A VERY IMPORTANT CHANCE.

EISEN: AND MEANTIME, IT'S ALL ON MONETARY POLICY TO DO THE DIRTY WORK.

GREENSPAN: WELL, MONETARY POLICY I THINK HAS REALLY RUN OUT OF – HAS DONE EVERYTHING IT CAN. UNLESS YOU WANT TO PUT ADDITIONAL QEs ON AND QEs ON, THEY'RE NOT HELPING THAT MUCH. AND SINCE WHAT THAT ULTIMATELY DETERMINES OR WHETHER OR NOT YOU'RE GETTING AN EFFECT FROM THE QEs – WHAT HAS HAPPENED TO THE PRICE EARNINGS RATIO AND THAT OBVIOUSLY HAS DONE WHAT YOU WOULD EXPECT IT TO DO. YOU BRING LONG-TERM RATES DOWN AND PRICE EARNINGS RATIOS IN THE EQUITY MARKETS GO UP, WHICH IS EXACTLY WHAT THEY PLANNED TO DO AND IT HAPPENED THAT WAY.

EISEN: BUT IT'S OVER.

GREENSPAN: BUT IT'S OVER – NOT FULLY. BUT THERE'S NO REAL EVIDENCE THAT WE ARE GETTING AN IMPACT ON LENDING AND THE ECONOMY IS PICKING UP.

EISEN: WHAT ABOUT NEGATIVE RATES? CHRISTINE LAGARDE OF THE IMF JUST TOLD US NET POSITIVE, EVEN THOUGH THERE ARE SIDE EFFECTS.

GREENSPAN: I THINK NOT.

EISEN: YOU DISAGREE.

GREENSPAN: LOOK, NEGATIVE RATES ARE BEST UNDERSTOOD IN THE CONTEXT OF THE FACT THAT THERE ARE CERTAIN CURRENCIES WHICH ARE MUCH STRONGER THAN OTHERS. FOR EXAMPLE, TEN YEAR LIRA NOTE OR THE ITALIAN EURO NOTE YIELD IS SIGNIFICANTLY ABOVE WHERE SWITZERLAND WOULD BE. NOW THAT SPREAD WILL STAY THERE IRRESPECTIVE OF WHERE THE OVERALL INTEREST RATE STRUCTURE IS. SO THAT WHEN INTEREST RATES OVERALL ARE COMING DOWN, ALL OF A SUDDEN, IF YOU'RE GOING TO KEEP THAT SPACE, SWISS RATES ARE GOING TO TURN NEGATIVE. WHY? BECAUSE EVERYONE WANTS TO INVEST IN SWISS CURRENCY AND SO THE DEMAND EXCEEDS THE SUPPLY AND WHAT YOU END UP WITH IS NEGATIVE INTEREST RATES.

EISEN: SO THIS IS DANGEROUS. IS THAT YOUR VIEW?

GREENSPAN: WELL, THEY HURT IN THE SENSE THAT FINANCIAL INTERMEDIARIES REQUIRE POSITIVE INTEREST RATES. BUT I WOULDN'T BLAME IT ON THE NEGATIVE INTEREST RATES, I'D BLAME IT ON THE POLICIES WHICH GOT US TO WHERE WE ARE. YOU WILL ALWAYS GET NEGATIVE INTEREST RATES IF THERE IS A SPREAD. NOW, THE SPREAD EXISTS BECAUSE QUALITY OF THE SECURITIES IS DIFFICULT. YOU CAN'T CHANGE THAT BECAUSE ULTIMATELY YOU SOLVE NEGATIVE INTEREST RATES WHEN PEOPLE DECIDE THAT THEY'RE GETTING TIRED OF FOREGOING THE OBVIOUS ARBITRAGE, BUY CURRENCY AND STICK IT IN THE VAULT.

EISEN: WHICH WE ARE SEEING. JUST VERY QUICKLY IN THE MOMENT THAT WE HAVE LEFT, I WANT TO ASK YOU ABOUT OIL BECAUSE I KNOW YOU HAVE BEEN THINKING A LOT ABOUT THE IMPACT ON THE ECONOMY AND DEFLATIONARY PRESSURES. IT HAS BEEN THE KEY TO MARKETS OVER THE LAST YEAR OR SO. HAS OIL BOTTOMED?

GREENSPAN: I THINK IT'S TOO SOON TO TELL. THEY KEY STATISTICS ARE AT THE MOMENT WE HAVE ABOUT 2 TO 2.5 MILLION BARRELS A DAY GLOBAL SURPLUS. SHARP DECLINE IN PRICES HAS ACTUALLY CAUSED A NUMBER OF – A PRETTY LARGE NUMBER ACROSS THE BOARD OF PRODUCERS WHO CANNOT FUNCTION AT THOSE LEVELS. WHAT IS OCCURRING IS WE'RE SEEING A GRADUAL DECLINE IN THE UNITED STATES DOWN ABOUT 600 BARRELS A DAY IN THE LAST – WELL, SINCE THE PEAK.

EISEN: RIGHT. AND WE DON'T KNOW IF THAT'S ENOUGH.

GREENSPAN: AND IT'S GOING TO GO LOWER BECAUSE SHALE OIL PRODUCERS – MOST OF THEM ARE STILL ABLE TO GET CASH FLOW, BUT THEY CAN'T MEET THEIR OVERHEAD COSTS. AND WITH THE OVERHEAD COSTS FACTORED IN, NEW DRILLING, NEW EXPANSION WILL NOT OCCUR BECAUSE THE PRICE IS TOO LOW. YOU NEED ABOUT $60 A BARREL IN THE UNITED STATES TO REALLY REJUVENATE SHALE.

EISEN: WELL, I KNOW YOU HAVE BEEN THINKING A LOT ABOUT THIS AS OIL AND PRODUCTIVITY THE STUMBLING BLOCKS FOR YOU. THANK YOU FOR JOINING US HERE AT THE IMF HEADQUATERS.

GREENSPAN: THANK YOU.

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