Contributed by RedNickD
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Federal Reserve Chairman Ben Bernanke gave a speech in Rhode Island on Monday. Bernanke warned the audience of the Annual Meeting of the Rhode Island Public Expenditure Council that the state of American finances is “unsustainable.”
Bernanke is quoted as saying:
“Let me return to the issue of longer-term fiscal sustainability. As I have discussed, projections by the CBO and others show future budget deficits and debts rising indefinitely, and at increasing rates. To be sure, projections are to some degree only hypothetical exercises. Almost by definition, unsustainable trajectories of deficits and debts will never actually transpire, because creditors would never be willing to lend to a country in which the fiscal debt relative to the national income is rising without limit.”
He went on:
“The budgetary position of the federal government has deteriorated substantially during the past two fiscal years, with the budget deficit averaging 9-1/2 percent of national income during that time. For comparison, the deficit averaged 2 percent of national income for the fiscal years 2005 to 2007, prior to the onset of the recession and financial crisis. The recent deterioration was largely the result of a sharp decline in tax revenues brought about by the recession and the subsequent slow recovery, as well as by increases in federal spending needed to alleviate the recession and stabilize the financial system. As a result of these deficits, the accumulated federal debt measured relative to national income has increased to a level not seen since the aftermath of World War II.”
“Economic conditions provide little scope for reducing deficits significantly further over the next year or two; indeed, premature fiscal tightening could put the recovery at risk. Over the medium- and long-term, however, the story is quite different. If current policy settings are maintained, and under reasonable assumptions about economic growth, the federal budget will be on an unsustainable path in coming years, with the ratio of federal debt held by the public to national income rising at an increasing pace. Moreover, as the national debt grows, so will the associated interest payments, which in turn will lead to further increases in projected deficits. Expectations of large and increasing deficits in the future could inhibit current household and business spending–for example, by reducing confidence in the longer-term prospects for the economy or by increasing uncertainty about future tax burdens and government spending–and thus restrain the recovery. Concerns about the government’s long-run fiscal position may also constrain the flexibility of fiscal policy to respond to current economic conditions.”
“It would be difficult to identify a specific threshold at which federal debt begins to pose more substantial costs and risks to the nation’s economy. Perhaps no bright line exists; the costs and risks may grow more or less continuously as the federal debt rises. What we do know, however, is that the threat to our economy is real and growing.”
It was obvious throughout other parts Bernanke’s speech that he was blaming much of the future economic difficulties on the cost of state benefits and services to average people. The solution one would assume Bernanke implied is one that involves doing away with millions of people’s jobs, health care, retirement benefits, and unemployment aid. Doing this will only make the economic situation worse because it will throw more people in the unemployment line and stop money from circulating. As you can see from the quotes, the Chairman also took this into consideration.
It should be obvious that these capitalists and their bankers are unable to get the US, and the world, out of this hole that they have dug. Of course, we should question whether or not they are actually trying. Perhaps the troubling economic hole they’ve put us in isn’t just any hole, but rather a mass grave for the average person!