I was busy yesterday and missed most of the news. What I missed was Bernanke's warning that the US is headed down the path Greece is currently traveling. Like in RIGHT NOW!
Recent events in Europe, where Greece and other nations with large, unsustainable deficits like the United States are having increasing trouble selling their debt to investors, show that the U.S. is vulnerable to a sudden reversal of fortunes that would force taxpayers to pay higher interest rates on the debt, Mr. Bernanke said.
"It's not something that is 10 years away. It affects the markets currently," he told the House Financial Services Committee. "It is possible that bond markets will become worried about the sustainability [of yearly deficits over $1 trillion], and we may find ourselves facing higher interest rates even today."
So do we print more money to get out of harm's way? NOPE.
"We're not going to monetize the debt," Mr. Bernanke declared flatly, stressing that Congress needs to start making plans to bring down the deficit to avoid such a dangerous dilemma for the Fed.
This puts the ball in Congress' court. Do they have the cajones to implement a solution? That's a question for another day, and article.
And, surprising to me, Alan Greenspan is also not too happy with things right now.
Separately, Mr. Bernanke's predecessor, Alan Greenspan, told Bloomberg News that "fiscal affairs are threatening the outlook" for recovery from recession as Congress and the White House have been unable for years to make tough decisions to raise taxes or cut spending.
He said he is so concerned about a sudden sharp increase in interest rates that every day he checks the interest rate on 10-year Treasury notes and 30-year Treasury bonds, calling them the "critical Achilles' heel" of the economy.
I think some of my friends believe I live in a world without hope. Au contraire, I do have hope that we will tighten our belts, hitch up our suspenders, and deal with these issues, resulting in a positive outcome at the end. Recognizing that your house is on fire does not translate into an expectation that the house cannot be saved. It means you dial 911 and fight the fire. So far, our Congress (aided and abetted by a supine electorate) seems content to simply roast marshmallows. I wonder who they think constitutes the Fire Department.