Bernanke: States the Obvious with Shocking Candor

The obscure we see eventually. The completely obvious, it seems, takes longer.  ~ Edward R. Murrow

This morning Fed Chair Ben Bernanke went before the Congressional Committee on the Budget and made them aware of some shocking new events in the economy. Bernanke brought to the committees attention unemployment’s drag on the current economic slow-down,   Particularly troubling is the unusually high level of long-term unemployment: More than 40 percent of the unemployed have been jobless for more than six months… Shocking! Captain ‘Obvious’ Bernanke apparently just woke up from his Van Winklian slumber  to bring this to Congresses attention.

In further breaking news he commented on the Debt Crisis, Of even greater concern is that longer-run projections, based on plausible assumptions about the evolution of the economy and budget under current policies, show the structural budget gap increasing significantly further over time and the ratio of outstanding federal debt to GDP rising rapidly. This dynamic is clearly unsustainable.  Say it ain’t so Ben!?!

He went on to further sound the alarm against debt, Having a large and increasing level of government debt relative to national income runs the risk of serious economic consequences. Over the longer term, the current trajectory of federal debt threatens to crowd out private capital formation and thus reduce productivity growth. To the extent that increasing debt is financed by borrowing from abroad, a growing share of our future income would be devoted to interest payments on foreign-held federal debt. High levels of debt also impair the ability of policymakers to respond effectively to future economic shocks and other adverse events.  In laymen terms: US Debt is going to turn us into Greece in the coming years.

Then in a stroke of brilliance Bernanke gives us the solution to all our problems & sets the world right. To achieve economic and financial stability, U.S. fiscal policy must be placed on a sustainable path that ensures that debt relative to national income is at least stable or, preferably, declining over time. Attaining this goal should be a top priority. 

Big Ben is obviously smarter than a 5th grader, and in closing he pays homage to all children with a tear in his eye, Although we cannot expect our economy to grow its way out of our fiscal imbalances, a more productive economy will ease the tradeoffs that we face and increase the likelihood that we leave a healthy economy to our children and grandchildren.

Bernanke is the Fed Chair, we have placed our economic present and futures in his hands. Yet, when he over-states the obvious with no real working solutions it should make you run screaming to your financial adviser begging to have all your investments placed in Doomsday mode. Throw out all the rules and dive in head long to upwards of 50% of your net investments in precious metals & rare coins until further notice. I may be over-reacting a bit… OBVIOUSLY!


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