Bernanke - A WARNING OF THINGS TO COME!

[Sandra]

Sunday, November 21, 2010

Bernanke - A WARNING OF THINGS TO COME!

We have been warning people for years now of what is about to happen. Translation: The You-Know-What is ready to hit the Fan.

Yesterday,
Federal Reserve Chairman Ben Bernanke delivered a speech before the
the Annual Meeting of the Rhode Island Public Expenditure Council in
Providence, Rhode Island. In the speech, he warned about the current
state of the government finances. His conclusion, the situation is
dire and "unsustainable".
It is remarkable that mainstream media has given this speech no coverage. I repeat, the central banker of the United States says in his own words:
Let me return to the issue of longer-term fiscal sustainability. As I have discussed, projections by the CBO and others show future budget deficits and debts rising
indefinitely, and at increasing rates. To be sure, projections are to
some degree only hypothetical exercises. Almost by definition,
unsustainable trajectories of deficits and debts will never actually
transpire, because creditors would never be willing to lend to a
country in which the fiscal debt relative to the national income is
rising without limit. Herbert Stein, a wise economist, once said, "If
something cannot go on forever, it will stop."
One way or the other, fiscal adjustments sufficient to stabilize the federal budget will certainly occur at some point. The only real question is whether these
adjustments will take place through a careful and deliberative process
that weighs priorities and gives people plenty of time to adjust to
changes in government programs or tax policies, or whether the needed
fiscal adjustments will be a rapid and painful response to a looming
or actual fiscal crisis.
This is as close as you are ever going to see a central banker admit that his country's financial situation is so dire that it could breakup at any time.
Here's more from Bernanke's remarkable speech:
The recent deep recession and the subsequent slow recovery have created severe budgetary pressures not only for many households and businesses, but for governments as well.
Indeed, in the United States, governments at all levels are grappling
not only with the near-term effects of economic weakness, but also
with the longer-run pressures that will be generated by the need to
provide health care and retirement security to an aging population.
There is no way around it--meeting these challenges will require policymakers and the public to make some very difficult decisions and to accept some sacrifices. But history
makes clear that countries that continually spend beyond their means
suffer slower growth in incomes and living standards and are prone to
greater economic and financial instability.
Now, get this, he warns that it is not only the Federal government that has financial problems, but also states and local governments:
Although state and local governments face significant fiscal challenges, my primary focus today will be the federal budget situation and its economic implications.
Does Bernanke see the tsunami hitting or what?
Then, he put things in historical perspective:
The budgetary position of the federal government has deteriorated substantially during the past two fiscal years, with the budget deficit averaging 9-1/2 percent of
national income during that time. For comparison, the deficit averaged
2 percent of national income for the fiscal years 2005 to 2007, prior
to the onset of the recession and financial crisis. The recent
deterioration was largely the result of a sharp decline in tax
revenues brought about by the recession and the subsequent slow
recovery, as well as by increases in federal spending needed to
alleviate the recession and stabilize the financial system. As a result
of these deficits, the accumulated federal debt measured relative to
national income has increased to a level not seen since the aftermath
of World War II.











Read more: http://www.economicpolicyjournal.com/2010/10/bernanke-tells-truth-united-states-is.html