Former US Federal Reserve chairman Paul Volcker warned on Tuesday that inflation may be getting out of hand "and the United States better watch out."
He also warned that Americans are spending more than they produce and that this cannot go on indefinitely.
"The economy is doing pretty well," Volcker said. "The question is how long will it last?"
Answering a few economic questions at a session mainly devoted to the investigation of corruption in the UN oil-for-food prog-ram which he led, Volcker said the US economy was doing well "as a result of our proclivity to consume."
People in other countries like lending the US money because they like to sell Americans the goods that they are consuming, he said.
"It's all bridged by money flowing to the United States from Japan, from China, and so forth," Volcker said.
"I don't know how long that can go on because we are spending -- consuming and investing -- 6 percent or 7 percent more than we are producing," he said. "And I think in the long run that's unsustainable."
Volcker was asked about the impact of rising prices for oil and gasoline, which fueled a 1.2 percent increase in inflation in September. According to the latest figures, the US experienced surprisingly strong 3.8 percent economic growth in the third quarter -- but an inflation gauge tied to the GDP report showed prices rising at a 3.7 percent rate during the three-month period, the fastest pace in just over a year.
"One thing you can say very clearly is that there's some sense inflation is getting out of hand, and the United States better watch out," Volcker said.
Volcker was credited with breaking the back of the stubborn, double-digit inflation that plagued the economy in the late 1970s and early 1980s, by ratcheting up interest rates to levels not seen since the Civil War.
"We're not in that situation now," he said, "but we better be careful not to get in it."
Volcker was succeeded as Fed chairman by Alan Greenspan. Last week, US President George W. Bush named Ben Bernanke to succeed Greenspan.
"He's well-trained, a good Princeton economist," Volcker said of Bernanke. "He's been down there [in Washington] for a while, so let's see."
What are the challenges Bernanke faces?
"The economy, inflation, debt and companies," Volcker replied, naming just a few.
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