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Bernanke Admits Borrowing and Spending Are Disastrous for Economy

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RAVEN CLABOUGH
New American
April 14, 2012

Federal Reserve Chairman Ben Bernanke declared this week that too much borrowing and spending will eventually destroy the nation’s economy. Of course, a number of others have made similar assertions all along, but coming from the Federal Reserve chairman, who has seemingly attempted to mislead the public on the state of the economy, it is a surprising declaration.

Appearing before the Senate Budget Committee, Chairman Bernanke said:

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.

What Bernanke carefully failed to mention is that a good portion of that debt is owed to the Federal Reserve. CNBC reported in February:

That’s right, the biggest single holder of U.S. government debt is inside the United States and includes the Federal Reserve system and other intragovernmental holdings. Of this number, The Fed’s system of banks owns approximately $1.65 trillion in U.S. Treasury securities (as of January 2012), while other U.S. intragovernmental holdings — which include large funds such as the Medicare Trust Fund and the Social Security Trust Fund — hold the rest.

In August, Texas Congressman and GOP presidential candidate Ron Paul introduced HR 2768, legislation designed to cancel the $1.6 trillion in debt. “I would say that is not a real debt. It’s a fictitious debt. It’s a dishonest debt, and that we’re not obligated,” he said. Unfortunately, Paul’s bill disappeared in a congressional committee.

And while Bernanke is suddenly sounding like a fiscal conservative, the underlying contributing factor to the U.S. debt and economic plight is the Federal Reserve and the nation’s monetary policies. Ron Paul said as much before the House Committee on Financial Services Subcommittee on Domestic Monetary Policy last year.

Full article here

This article was posted: Saturday, April 14, 2012 at 4:11 am





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