Wednesday, February 9, 2011

Bernanke On Debt

From Ben Bernanke's testimony before Congress today:

"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."

Tremendous honesty from the Federal Reserve chairman.

It is obvious by now that the adjustment will come in the form of door number 2, a fiscal crisis, as no serious cuts to the trillion dollar annual deficits have been announced or even discussed.

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