I totally loved this little Clown Car The Market Ticker Guy came up with showing Zimbabwe Ben, Zimbabwe BO and Tax Cheat Timmy getting out. I had to share it with you and Karl Denningers article along with other supporting pieces. Enjoy!!!
The increases in spending and reductions in taxes associated with the fiscal package and the financial stabilization program, along with the losses in revenues and increases in income-support payments associated with the weak economy, will widen the federal budget deficit substantially this year. The Administration recently submitted a proposed budget that projects the federal deficit to reach about $1.8 trillion this fiscal year before declining to $1.3 trillion in 2010 and roughly $900 billion in 2011. As a consequence of this elevated level of borrowing, the ratio of federal debt held by the public to nominal GDP is likely to move up from about 40 percent before the onset of the financial crisis to about 70 percent in 2011. These developments would leave the debt-to-GDP ratio at its highest level since the early 1950s, the years following the massive debt buildup during World War II.
Certainly, our economy and financial markets face extraordinary near-term challenges, and strong and timely actions to respond to those challenges are necessary and appropriate. Nevertheless, even as we take steps to address the recession and threats to financial stability, maintaining the confidence of the financial markets requires that we, as a nation, begin planning now for the restoration of fiscal balance. Prompt attention to questions of fiscal sustainability is particularly critical because of the coming budgetary and economic challenges associated with the retirement of the baby-boom generation and continued increases in medical costs. The recent projections from the Social Security and Medicare trustees show that, in the absence of programmatic changes, Social Security and Medicare outlays will together increase from about 8-1/2 percent of GDP today to 10 percent by 2020 and 12-1/2 percent by 2030. With the ratio of debt to GDP already elevated, we will not be able to continue borrowing indefinitely to meet these demands.
Addressing the country's fiscal problems will require a willingness to make difficult choices. In the end, the fundamental decision that the Congress, the Administration, and the American people must confront is how large a share of the nation's economic resources to devote to federal government programs, including entitlement programs. Crucially, whatever size of government is chosen, tax rates must ultimately be set at a level sufficient to achieve an appropriate balance of spending and revenues in the long run. In particular, over the longer term, achieving fiscal sustainability--defined, for example, as a situation in which the ratios of government debt and interest payments to GDP are stable or declining, and tax rates are not so high as to impede economic growth--requires that spending and budget deficits be well controlled.
The problem is that Bernanke is enabling these sky-high deficits by intervening in the Capital Markets - that is, by buying both agency and Treasury bonds!
IF Bernanke was a true independent central banker, and IF he believed the first word that he was speaking, he would force fiscal restraint by refusing to buy any more MBS or Treasury debt.
Rates would move up, but this would put a 1990s-style bond market slam-hold on President Obama's and Congressional "drunken-sailor style" spending binge.
I only look at what people do - a good part of the time what people say is in fact exactly the opposite of what they're doing, because they are trying to goad you into doing something stupid so they can say "Sold To You!", sticking you with the bag.
I will buy that Bernanke is serious about his so-called "urgings" when he withdraws the idiotic attempt to support both MBS and Treasury issuance.
Perhaps - just perhaps - this speech is a warning - Ben has been reading some Tickers and listening to some Chinese folks, and is starting to get concerned that a bond market implosion may be in the offing - and he has no intention of being the one caught holding the bag when it blows up.
Funny how it only took Ben two years beyond when I started screaming about this in public to figure it out!
Wow great stuff but there is more Today Bernanke Found the Elephant in the Room!
Today, Mr. Bernanke told Congress it had to cut the deficit. It is a deficit the the federal government has only just begun to build, so it sounded like the Fed chief wanted Congress to reverse course as soon as possible.
No that's not a typo: that's the statistic according to USA Today. The folks over there have done some really great work this week with another interesting interactive chart attached to an article about the nation's debt. If they keep this up, I'll have to stop considering it a useless free newspaper I step over when leaving a hotel room. The numbers it reports are staggering.