Ben Bernanke: Federal Budget on Unsustainable Path – DUH!

Federal Reserve Bank Says U.S. Budget on an Unsustainable Path

Benny Bernanke What a Swell Guy

This coming from the guy that heads the largest debt holder of U.S. debt.  The biggest holder of US government debt is actually inside  the United States. The Federal Reserve system of banks account for a stunning $5.127 trillion in US Treasury debt. This is the most recent number available (Sept 2009), and is at an all-time high, rising in every reporting period since 2007. About a decade ago, the total government holdings were “only” $2.5 trillion.

Testifying before the House Budget Committee on the state of the economy on Wednesday, Ben Bernanke told Congress that it needs to develop a plan to manage the nation’s burgeoning debt, because the federal budget “appears to be on an unsustainable path.”

You might be thinking, or maybe it’s just me, “what’s his angle? Is Ben Bernanke a banker that cares about the citizens of the U.S. instead of his private shareholders who has congress over a barrel?”

Bernanke’s Hand Revealed

Bernanke was concerned that lawmakers could render the dollar a moot point and not worth investing in, i.e. collapsing, and to take decisive action to show investors that the country can get back on the right financial path.

“The deficit has created a structural budget gap that is both large relative to the size of the economy and increasing over time,” Bernanke said.  “We need to convince markets in the medium and longer term that we have a sustainable fiscal path for balancing our budget or at least bringing our deficits down,” adding “medium-term” means three to five years down the road.

“If confidence is lost in our long-term fiscal stability, we will see our interest rates go up quite a bit and that would affect the consumer’s ability to buy houses,” he said. “It would slow our economy, and it would put pressure on the balance sheets of financial institutions.”

Bernanke said the Fed has a long-term plan for managing monetary policy, and Congress should have a similar plan for managing the fiscal side.

“Right now, there’s not anything on the table,” he said.

While warned lawmakers they need a sound budgetary plan to stem the huge deficits, Bernanke also defended the decisions that contributed to those deficits in the first place, like the Troubled Asset Relief Program [ TARP ] and stimulus funding, saying the government had to spend money to prevent America’s economy from completely collapsing last year.

The Fed chairman also responded to lawmakers’ concerns about the European debt crisis [ read Greece ], saying leaders are “aggressively” handling their financial crisis, which he believes will only have a “modest” impact on economic growth in the United States.

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shakaama

Ex law school student. I was kicked out for revealing I had a heart actually beating inside. I used to be in a modern dance company. I'm working on my 7 miracles to be proclaimed a saint by the pope. #1 is really hard, but once i get over that hump the other 6 will be a cinch.

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