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Thread: Bernanke Warns Long-Term Deficits Threaten Financial Stability

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    Bernanke Warns Long-Term Deficits Threaten Financial Stability

    Bernanke Warns Long-Term Deficits Threaten Financial Stability
    By Craig Torres and Brian Faler

    June 3 (Bloomberg) -- Federal Reserve Chairman Ben S. Bernanke said large U.S. budget deficits threaten financial stability and the government can’t continue indefinitely to borrow at the current rate to finance the shortfall.

    “Unless we demonstrate a strong commitment to fiscal sustainability in the longer term, we will have neither financial stability nor healthy economic growth,” Bernanke said in testimony to lawmakers today. “Maintaining the confidence of the financial markets requires that we, as a nation, begin planning now for the restoration of fiscal balance.”

    Bernanke’s comments signal that the central bank sees risks of a relapse into financial turmoil even as credit markets show signs of stability. He warned the financial industry remains under stress and the credit crunch continues to limit spending.

    The Fed chief said that deficit concerns are already influencing the prices of long-term Treasuries. Yields on 10- year notes have climbed since the Fed announced plans in March to buy $300 billion of long-term government bonds.

    “In recent weeks, yields on longer-term Treasury securities and fixed-rate mortgages have risen,” Bernanke said. “These increases appear to reflect concerns about large federal deficits but also other causes, including greater optimism about the economic outlook, a reversal of flight-to-quality flows and technical factors related to the hedging of mortgage holdings.”

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    This is what I (and many others) have been saying for some time; the pace that the US government is borrowing at and spending is disastrous, and could lead to a massive problem in the near future. The fact that Bernanke is saying that this could "threaten financial stability" is incredibly frightening.

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    Re: Bernanke Warns Long-Term Deficits Threaten Financial Stability

    He's just realizing this NOW????????

    Is half of Washington just permanently high that they are unaware of the borrow-and-spend lunacy that passes for budget "process" these days?

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    Re: Bernanke Warns Long-Term Deficits Threaten Financial Stability

    I am torn, is Bernanke capt. obvious, or capt. clueless?
    ECON 101/102 covers my limited exposure to the academics of economics, but that is enough for me to know that we cannot continue to rack up debt and maintain our position in the world.
    Eventually, the nation's debt will be called in by its creditors, one way or another.
    Oracle of Utah
    Truth rings hollow in empty heads.

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    Re: Bernanke Warns Long-Term Deficits Threaten Financial Stability

    Quote Originally Posted by celticlord View Post
    He's just realizing this NOW????????

    Is half of Washington just permanently high that they are unaware of the borrow-and-spend lunacy that passes for budget "process" these days?
    This is what hapens when you operate under the mindset that the government exists to provide people with the means to exercise their rights.

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    Re: Bernanke Warns Long-Term Deficits Threaten Financial Stability

    Quote Originally Posted by Goobieman View Post
    This is what hapens when you operate under the mindset that the government exists to provide people with the means to exercise their rights.
    Funny, I thought this is what happened when people just lost their minds.

    Fire Bernanke, fire Congress, fire Dear Leader.....turn Washington into a ghost town.

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