Few people can match the economic expertise of Alan Greenspan,former Chairman of the U.S. Federal Reserve. He served as thesenior economic advisor to Presidents Ronald Reagan, George H.W.Bush, Bill Clinton and George W. Bush. He set the bar forinstructing an often ignorant and easily distracted Congress onmatters of intricate economic policy. And he served as the Chairmanof the U.S. Federal Reserve.

So when he took the stage as a keynote speaker at KPMG's 2014Insurance Industry Conference Tuesday, he came with his bona fidesin order, and ready to speak to an audience that was keenlyinterested in any vision he could provide on 1) where the economyis going, 2) why, and 3) when (if ever) is it likely toimprove.

[Related: 9reasons why Alan Greenspan is wrong abouteverything]

The short answers to those are: 1) nowhere fast, 2) becausenobody is willing to invest, and 3) eventually, but nobody can tellwhen.

As he dug into the issues, he highlighted 7 key points on whichour economic growth is hung up, and how the insurance industryplays into all of it. Read on.

9. Lack of confidence.

The U.S. economy is in a state of extraordinary change,Greenspan said, the likes of which he has never seen before. Themost interesting thing about the current recession and recovery, hesaid, is that in the 10 recoveries we saw since WWII, every oneexcept the current one was led by construction, essentially. Thisrecovery is so sluggish because construction is, as Greenspan sodelicately put it, "dead in the water." The reason why constructionis so dead is due, in part, to excess capacity built up before theeconomy crashed in 2008. But more importantly, businesses andhouseholds across the board are so skeptical of the future, they'renot willing to invest in it. Nobody is putting money intolonger-lived assets, and until they do, the economy won't reallyreturn to form.

Case in point: in the early 1990s, the amount of liquid cashassets companies were willing to invest in illiquid, long-termassets was way higher than it is now. You also see this in theyield spread in 5-year U.S. Treasury notes versus 30-year U.S.Treasury bonds, which is the widest in U.S. history. Why? Becausepeople are far more willing to invest on a 5-year return than a30-year one. That speaks to the depth of the worry people have inthe future. And that kills growth.

8. Renting instead of buying.

The same is true in U.S. households. The single-family homeconstruction market collapsed in the 2008 crash, and it induced amajor shift; many more houses that are being built now are meantnot for sale but for rental. Home ownership is way below where itwas years ago, and there is no evidence that even with rising homeprices that this will change any time soon.

That speaks to the degree of economic malaise in the U.S.,Greenspan said. Unless we can change that, then we can't change theeffective demand needed to move the economy forward. And witheffective demand several points below where it ought to be – withour economy working well below capacity – that is where ourunemployment and overall economic weakness comes from, hangingaround like an unwelcome house guest.

7. It's a global problem.

This is not unique to the United States, Greenspan noted.

The "very tricky fiscal problems" that the United States isfacing are fundamentally the same that are being faced by developedeconomies across the world, from the UK. Germany and the Eurozone,Ukraine, Japan, and elsewhere. Construction as a share of GDP isthe same in these places as in the U.S., essentially, andconstruction remains down across the board. People are heavilydiscounting the future, Greenspan said.

One example is in how corporations evaluate the probable rate ofreturn on a specific facility and then wonder what the variance onthat return might be. That variance is really what the executivecommittees of corporation are really interested in, Greenspan said,and if a project is supposed to have a 30% yield, but there is a10% chance of it returning a -10% yield, then the project will bedead in the water.

In this kind of environment, corporate tax rates becomeimpossible to estimate, and that results in a serious curtailmentof expenditures. When people don't have a clue what the tax ratewill be 20 or 30 years from now, and they have projected incomefrom those years, then it drives up the effective cost of currentprojects.

China is the one part of the world where this isn't a problem,but that's about to change…

6. China's debt bubble is going to burst.

China's overall level of debt has gone from 140% of its GDP to230% of GDP, which Greenspan glibly remarked is a sure sign thatthe Chinese economy is becoming overleveraged. It is requiringever-larger amounts of social debt to fuel the country's growthrate.

Greenspan noted that China has had "a remarkable run" the likesof which have never been seen before in measurable history. But,its gains in productivity and standards of living were all donewith borrowed capital and technology. Annual lists of the world'smost innovative companies feature no Chinese companies, and nearlyhalf of those lists are made up of American companies. This isleading to a narrowing productivity gap between China and the U.S.that is putting serious pressure on the Chinese economy.

The reality is that China is hitting the ceiling and its growthrate must slow. But when you have a one-party political system,there usually isn't a whole lot of out-of-the-box thinking, whichis precisely what China needs right now. And since you can'tdivorce economic thought from political thought, this does notpoint toward good things for China. The Chinese hierarchy isacutely aware of this, Greenspan said, and it plans to allow anumber of companies go into bankruptcy.

This is big, since most of the institutional lending in Chinahas been backed by the government. There is a substantial amount ofessentially shadow banking that operates with the same presumedbacking of the government, but that backing is not really there,and the government is about to let some companies know that thehard way. Look for some Chinese defaults in the future, perhaps inits seriously overextended steel industry or elsewhere in tismanufacturing sectors.

That said, Greenspan also noted that while bubbles, bydefinition, burst, not all bubbles are toxic. The dot-com bubblebursting in the 1990s was individually ruinous for many people, butit was not an institutional bubble. The subprime mortgate situationin the late 2000s was an institutional situation. China knows thedifference and is doing everything to ensure that when its bubblebursts, it'll be the first kind of problem and not the second kind.Will they succeed? Who knows.

5. A diminished U.S. military means an unstableworld.

Greenspan noted that at the end of the Cold War, the U.S. wasleft standing as the sole superpower, and it used its military heftto act as the world's policeman, suppressing conflict in a numberof hot spots for a number of years.

Until recently, the share of gross domestic savings frombusiness, households and government as a share of various forms ofentitlements remained relatively constant. What we're talking abouthere, really is Medicare and Social Security, which Greenspandescribed as the "third rail of American politics." And there isserious growth there that is not going to stop, as the Baby Boomersget older and as Seniors live longer lives. These entitlements,Greenspan noted, tend to rise the most during Republicanadministrations, but they're rising across the board, and unless weslow the rate of growth in our entitlements, the reality is thateventually, we will have to cut military spending to afford itall.

Greenspan pointed to Russia's "Czarist" expansionism in Ukraine,and Vladimir Putin's implication that what would be best for Russiawas to restore the Soviet Union. He pointed to clear commitments toprotect NATO nations against Russian aggression. And he pointed tothe rise of ISIS in the Middle East means that the U.S. will haveto get further involved in that region to protect the world's oilsupply – something only the U.S. can do.

This all points to severe strain on the U.S. military at a timewhen our spending on it is poised to fall, and fall dramatically.This means that hot spots that had been kept calm are likely toexplode, and this will create further uncertainty across the world,which will help the economies of exactly nobody. The militarybudgets will have to go up, but with no will to raise taxes or cutother costs, the only solution to this particularly sticky wicket,Greenspan said, is "to repeal the laws of arithmetic."

4. Interest rates and inflation.

Eventually, interest rates have to rise, Greenspan said, withthe kind of vagueness that comforts no insurer who has seen theirinvestments wither on the vine for the last five years or so.Greenspan said that a figure that interests him is that interestrates in 5th century Greece are pretty much the same as what theyhave been in the last 50 years or so across the globe.

There is something inbred into the system, he said, and inbredinto the propensities of human nature that regulate interest rates.The long-term yield on things like stocks, real estate, earnings,etc., are critical and can't stay at zero forever, and wouldn'teven be there if we weren't keeping them there. The rates aresuppressed, Greenspan said, because the Federal Reserve hasabsorbed so many mortgage-backed securities and U.S.Treasuries.

We have to taper at some point, and things will only turn aroundonce we see commercial and industrial loans tease that money out ofthe federal system and paid out to the commercial markets. This isa necessary condition for inflation. It is not happening yet. Butit will. And when it does, Greenspan says, it will surprise us withhow quickly it moves. Be prepared.

3. Regulatory over-reach.

Greenspan is not a fan of recent regulatory developments,especially Dodd-Frank.

The principle of regulation, he said, is that it identifies aproblem that exists in the system, and implies that if that problemis solved, the system will return to functioning as it ought to.This requires a good conceptual view of how the financial systemworks. The legislators who crafted Dodd-Frank did not have thatview, and as such, they crafted an unholy mess of a law that can'teven be implemented.

Case in point: The day President Obama signed Dodd-Frank intolaw, Ford Motor Credit had a $1 billion asset-backed entity, butthe SEC now required all asset-backed instruments to have a creditrating. But because Dodd-Frank stipulated that credit ratingagencies must assume partial responsibility if the firms they ratego pear-shaped, Ford couldn't get a rating for their instrument. Sowhat did Ford do? They simply ignored the rule.

And they're not the only ones, Greenspan noted. There are a hugenumber of cases where Dodd-Frank is simply not being enforcedbecause the law doesn't work.

The problem is that this is the kind of law that you can'treally unwind. Once you hire regulators, Greenspan said, their jobis to regulate…and they will always find something to regulate. Sowhile the law doesn't work, we're stuck with it.

"Undoubtedly, there were some very questionable practices priorto the financial crisis," Greenspan said. A lot of it was in creditdefault swaps, which were a form of derivative. But interest ratesare also a form of derivative, as are foreign currency exchangesand even wheat. There was a huge market for over-the-counterderivatives that went through the financial crisis without a singledefault because those markets worked exactly as they were supposedto, but now, they have extra regulation, essentially because ofguilt by association.

None of this regulation helps the economy get back on its feet,Greenspan suggested. And just because there is evidence thatDodd-Frank isn't working, and likely will never work, to think thatis evidence it will be abandoned, he said, "is a non-sequitur."

2. A lack of leadership.

Greenspan has worked with five Presidents, and he ws quick topoint out the two which he felt were the most effective at gettingwhat they wanted done, done. And those were Ronald Reagan and BillClinton.

"The President has got to have an extraordinary number ofcharacteristics, both of which Reagan and Clinton had," Greenspansaid. "They have to have a sense of what kind of democracy we havein this country and value systems and rule of law. And they have tohave a sense of the history of it all. And they have to be able toconvey to the populace where they think they are wrong."

As an example, Greenspan cited Bill Clinton's decision to bailout the Mexican government in 1995, despite the fact that he knewfor certain that had this gone to a vote before Congress, it wouldhave failed, and overwhelmingly so. But Clinton knew it had to bedone, and that it could cost him politically, and so he crafted away to make the monies available to Mexico. Mexico ultimately neverdrew on them, but the crisis disappeared.

"That is leadership," Greenspan said. "And there were manysimilar ways in which Reagan did the same thing. The crucial issueis, are you a leader or a follower?"

Both Reagan and Clinton knew how to read polls well, but theyweren't going to let themselves be run by them. Much as we like tobelieve that we could run the government by referendum, the realityis that all we'd get from it are 100% of the people wanting morespending, and lower taxes. The political world wants things thatrange form the unrealistic to the impossible, and it falls to thePresident to run counter to that, and not every President has beenequally able to do that.

Greenspan didn't call out President Obama by name (or eitherPresident Bush), but draw your own conclusions.

1. Nobody appreciates insurance enough.

The insurance industry as we know it – or at least the actuarialmathematics that underpin it – got rolling when two Scottishministers in the 18th century devised a fund that would take careof their widows, and the actuarial methods they used were prettyspot on and have not really changed that much since. Insurance,Greenspan said, is really nothing more than saving for a rainy day.And insurance, by its construction, is a major form of savings forthis country.

"The whole structure of the industry is the mechanism by whichyou're converting consumption into savings," Greenspan said, "andthe only way the economy can grow is to save."

Insurance, he noted, is the most formidable mechanism we have tosave as a society, and the economics of insurance have not beengiven proper weight by economists in how they look at the world.That is why the insurance industry needs to thrive and to be giventhe support it needs to thrive; getting the optimum amount intosavings and investing in cutting-edge technologies are the onlyreal way to get our standard of living to grow. And insurance is atthe heart of it.

But then again, you already knew that, right?