Fed chairman Ben Bernanke told congress yesterday that large U.S. budget deficits threaten financial stability and the government can't continue indefinitely to borrow at the current rate to finance the shortfall. He added that:
"Unless we demonstrate a strong commitment to fiscal sustainability in the longer term, we will have neither financial stability nor healthy economic growth. Maintaining the confidence of the financial markets requires that we, as a nation, begin planning now for the restoration of fiscal balance."
The Bloomberg report goes on to say that:
Bernanke's comments signal that the central bank sees risks of a relapse into financial turmoil even as credit markets show signs of stability. He said the Fed won't finance government spending over the long term, while warning that the financial industry remains under stress and the credit crunch continues to limit spending.
We have to wonder why congress and the White House are insisting on driving this financial train over the precipice. Surely, they all know what Bernanke and anyone else who has a bank account knows - you can't keep spending money you don't have, running up debts you have no way of paying off.
The article went on to offer some insight into how we're going to pay off Obama's shopping spree:
The budget deficit this year is projected to reach $1.85 trillion, equivalent to 13 percent of the nation's economy, according to the nonpartisan Congressional Budget Office.
"Either cuts in spending or increases in taxes will be necessary to stabilize the fiscal situation," Bernanke said in response to a question. "The Federal Reserve will not monetize the debt."
If Bernanke's telling the truth then the Fed will refuse to just print money to pay off Obama's debts. The bad news, however, is that the only other way to pay them off will be to raise taxes. A lot. In other words, if you think your paycheck is too fat now, just wait. It's about to go on a very severe diet.
Look, too, for the administration to answer Bernanke's impertinence by replacing him at the Fed with someone more compliant and less responsible.RLC