(eToro Blog) As the previous Chairman of the Federal Reserve Bank, Alan Greenspan was once considered the most powerful and influential man in the world. Now, as a private citizen, he finds himself, and his economic views, generally at odds with those of current Fed Chairman Ben Bernanke, President Obama, and a vast majority of the U.S. Legislature.

According to Mr. Greenspan, the U.S. financial crisis is now at such a serious juncture, with a record deficit and a debt ceiling that needs repositioning, that he is suggesting that its time to raise tax rates to a scale not seen in nearly two decades. To put it succinctly, Mr. Greenspan is "scared."

The issue of income tax rates has been under intense debate during both the Obama and the (George W.) Bush administrations. But former Chairman Greenspan, along with some key Democrats, believes that raising income tax rates is the key to closing the budget cap and bringing in some much needed revenue. This proposal, he admits though, is his "fallback position." He acknowledges that his first strategy would have been an endorsement of Rep. Paul Ryan's deficit cutting (through Medicare abolishment) plan, which isn't likely to get majority backing.

As regards the issue of the debt ceiling, which was officially struck on May 16th according to the U.S. Treasury Department, Mr. Greenspan notes that Congress really has no choice in the matter, because it would be catastrophic if the U.S. were not capable of meetings its obligations. And, perhaps echoing Chairman Bernanke's own sentiment, in his view, Congress' bipartisan squabbling on the issue is "extraordinarily dangerous."

Certainly, Mr. Greenspan's views are likely to be widely criticized. The question is how best to balance the need for deficit reduction while encouraging economic growth? The U.S. Dollar's survival hinges on both.

On the eToro trading floor, traders of EUR/USD are bullish in favor of buying by 11 to 4. Sentiment among eToro's USD/JPY traders is in favor of selling with a slight advantage of 7 sellers to 6 buyers.

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