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Bernanke’s Warning on Government Debt

Written by Gary North on April 18, 2012

Ben Bernanke sees that the present deficit is not sustainable. He has repeatedly warning Congress that a crisis is brewing if Congress will not call a halt to the deficit. Congress of course kicks the can.

It is interesting that CNN, an Establishment media outlet, has called attention to Bernanke’s warning. Consider this.

Official Congressional budget estimates understate the peril of rising debt, Fed chair Ben Bernanke told the Budget Committee on Capitol Hill today.

Warning that our nation’s fiscal health has deteriorated appreciably since the onset of the financial crisis and the recession, Bernanke called upon lawmakers to confront the long term fiscal challenges sooner rather than later. If lawmakers don’t confront them, they’ll find themselves confronted by them.

This is an accurate assessment of Bernanke’s position.  He is fully aware that the Federal Reserve will have to intervene to buy most of the government’s new debt if this continues. This will lead to mass inflation. If Congress does not face the grim reality of the government’s debt, the Federal Reserve will either inflate or refuse to inflate. If it refuses to inflate, interest rates will soar, and there will be another major recession.

Here are Bernanke’s words.

By definition, the unsustainable trajectories of deficits and debt that the CBO outlines cannot actually happen, because creditors would never be willing to lend to a government with debt, relative to national income, that is rising without limit. One way or the other, fiscal adjustments sufficient to stabilize the federal budget must occur at some point. The question is whether these adjustments will take place through a careful and deliberative process that weighs priorities and gives people adequate time to adjust to changes in government programs or tax policies, or whether the needed fiscal adjustments will come as a rapid and painful response to a looming or actual fiscal crisis.

He is not fooling around.

Sustained high rates of government borrowing would both drain funds away from private investment and increase our debt to foreigners, with adverse long-run effects on U.S. output, incomes, and standards of living. Moreover, diminishing investor confidence that deficits will be brought under control would ultimately lead to sharply rising interest rates on government debt and, potentially, to broader financial turmoil. In a vicious circle, high and rising interest rates would cause debt-service payments on the federal debt to grow even faster, resulting in further increases in the debt-to-GDP ratio and making fiscal adjustment all the more difficult.

CNN concludes: “In short, the official estimates members of Congress hear from their budget office are under-estimating our dire economic predicament. If fiscal policy is not brought under control, things will be much, much worse.” This is accurate.

There is growing optimism today that the worst is behind us. It isn’t. A brick wall is in front of us. It was built by Congress.

Continue Reading on www.cnbc.com

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11 thoughts on “Bernanke’s Warning on Government Debt

  1. Thanks obummer!!!

  2. John Stewart says:

    We also owe a rousing THANK YOU to Bela Pelosi, Hairless Reid, and the rest of the wonderful progressive/Marxist followers of the three criminals.

  3. lilbear68 says:

    thats great bernanke tells congress that if they keep letting him do what hes doing its gonna hit the fan, lol

  4. we the people time to kick out these treasonous politicians, there all treasonous,by allowing this to continue they are aiding and abetting a treasonous government,time to take back our once great country from these treasonous communist do nothing traders we the people take back our once great country,you no these treasonous trader politicans aren,t going to do anything,god bless ron paul,sheriff joe and cold case posee and all american veterans and all american citizens.ted we the people by me will see you in washington.

  5. lilbear68 says:

    well 2012 offers a unique opportunity as all 435 seats in the house are up for vote and 33 senates seats we can literally clean house and send a definate message to the senate. wanna bet the ppl just go on reelecting the nitwits we have and passing up a chance for a real change

  6. Let's vote them all out of office and start over.

  7. sean murry says:

    lets put them in prison along with obummer and crew.

  8. So this is news to anyone with a brain? The politicians, Reid and Obama are not going to pass a budget and are not going to rein in spending, they are passing continuing resolution off the highest spending approval that was given at the end of 2008 and the beginning of 2009. Of course it can't go on. That is why the GSA and secret service are partying like there's no tomorrow, because there isn't.

  9. Mitchina says:

    Actually… I think he is setting it up for not letting another crisis go to waste – and the last hammer will drop on us from this tyrynous gvt…

  10. "A brick wall is in front of us. Congress built it". Not without the ongoing assistance of the Federal Reservie they didn't. While he's correct regarding the brick wall, he always manages to overlook the engine that has driven this since 1913. I have for a long time believed, and still do, that as long as the Federal Reserve exists, debt, taxes, and inflation will continue till the US becomes extinct and it's remaining productive members of society eliminated. Between the burden of governmental welfare coupled with public welfare, I see no other outcome unless the Federal Reserve is abolished. As for the corporations, if I were someone who had invested millions of my own capital, labor and time, in starting up a company only to be forced out of business, or forced to relocate, due to government regulatory policies, in addition to be forced to support – from cradle to grave – every employee theynow hire, I'd leave too.. I am sick to death of the government, the Federal Reserve and half the sorry population who all think they are entitled to someone else's money – and always at the expense of the PRODUCTIVE MEMBERS OF SOCIETY.. STOP FEEDING OFF ME.

  11. […] Congress that things aren't as rosy as the Federal Reserve boss has tried to paint them. Bernanke's words to the Budget Committee are ominous, to say the least: "By definition, the unsustainable […]