View Full Version : Bernanke to Congress: We're Much Closer to Total Destruction Than You Think

04-12-2012, 08:39 PM
Bernanke explained that the Congressional Budget Office's calculations miss an important reality. As the government's debt and deficits rise, the economy will slow down—an effect not taken into account by the CBO. So, for instance, when the CBO says that federal spending for health-care programs will roughly double as a percentage of GDP in the next 25 years, it is probably being too optimistic. If debt keeps, rising, GDP will be much lower than the CBO estimates—which will mean that health care spending will be a much larger percentage of the overall economy.

Here's Bernanke on the effect of rising debt:

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.

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.


Finally something I agree with the FED on.

04-12-2012, 08:59 PM
regardless of the nonsense your favorite politician is pushing, the massive downsize is coming

debt spending equals inevitable collapse and we all know it

irish fin fan
04-12-2012, 10:02 PM
You will also notice the timing of this statement. He recently stated that he doesn't think that any more qe is needed for the economy. Now he's moving on to deficit reduction agenda which NOW makes sense.

04-18-2012, 08:34 PM
The debt bubble is still growing...eventually it will pop. What will all the poor welfare masses do when their checks stop coming...
The answer is riot, loot, and worse.
I will tell you what will happen next..Martial law.
The government, no matter who is running the show, must take unpopular steps now to prevent a national catastrophe.

04-19-2012, 03:15 PM

Finally something I agree with the FED on.

As the government's debt and deficits rise, the economy will slow down

The same thing happened after past few decades of individual debt skyrocketing...especially made worse because vast amounts of the over leveraged debt is tied up and "invested" long-term in housing. Leaving less money for savings, healthcare, your kids tuition, and other spending in the marketplace...unless their's more and more easy credit made available. A vicious unsustainable cycle leading to less revenue for companies...less pay for employees or build your ipads in China...and a "lost decade" of no real increase of domestic income or growth. Now what will the done over the next 10 years? Nothing doesn't come without cost that we will have to pay now but will be even more later if continualy putting it off. Even though we are a nation that loves to gamble, how long can we keep doubling down on debt and monetary manipulations hoping for the best?

04-20-2012, 02:21 PM
Legalize it.