by Calculated Risk on 11/26/2008 02:51:00 PM

Obama appointed former Fed Chairman Paul Volcker to head a new economic advisory board. Way back in February 2005, Volcker gave a speech at the Stanford Institute for Economic Policy Research warning of the problems the economy is now facing. Here is a video of that speech and a few excerpts:

"Altogether, the circumstances seem as dangerous and intractable as I can remember."

"Boomers are spending like there is no tomorrow."

"Homeownership has become a vehicle for borrowing and leveraging as much as a source of financial security."

"I come now to the heart of the problem, as a Nation we are consuming and investing, that is spending, about 6% more than we are producing. What holds it all together? - High consumption - high leverage - government deficits - What holds it all together is a really massive and growing flow of capital from abroad. A flow of capital that today runs to more than $2 Billion per day."

And it is this last point that is still concerning today. The U.S. will need to finance huge budget deficits over the next couple of years (due to a combination of the Bush structural budget deficit and a significant stimulus plan), and this will require more massive borrowing from abroad (or from investors at home).