Bernanke - We cannot grow out of our fiscal imbalances

[Chris Coles]

Testimony by Chairman Bernanke on the economic outlook and monetary and fiscal policy

It is widely understood that the federal government is on an unsustainable fiscal path. Yet, as a nation, we have done little to address this critical threat to our economy. Doing nothing will not be an option indefinitely; the longer we wait to act, the greater the risks and the more wrenching the inevitable changes to the budget will be. By contrast, the prompt adoption of a credible program to reduce future deficits would not only enhance economic growth and stability in the long run, but could also yield substantial near-term benefits in terms of lower long-term interest rates and increased consumer and business confidence. Plans recently put forward by the President's National Commission on Fiscal Responsibility and Reform and other prominent groups provide useful starting points for a much-needed national conversation about our medium- and long-term fiscal situation. Although these various proposals differ on many details, each gives a sobering perspective on the size of the problem and offers some potential solutions

http://www.federalreserve.gov/newsev...e20110107a.htm

[Chomsky]

Re: Bernanke - We cannot grow out of our fiscal imbalances

Pfft. Let's see him call for major cuts in military spending.

[ASH]

Re: Bernanke - We cannot grow out of our fiscal imbalances

Pfft. Let's see him call for major cuts in military spending.

Did he call for cuts in any specific area? I just read the snippet that Chris quoted. It might be argued that the Fed Chairman's role is to harangue Congress to get its fiscal house in order without presuming to suggest specific budget cuts. Or were you referring to his general support for the recommendations of the President's fiscal commission?

[LargoWinch]

Re: Bernanke - We cannot grow out of our fiscal imbalances

Testimony by Chairman Bernanke on the economic outlook and monetary and fiscal policy



http://www.federalreserve.gov/newsev...e20110107a.htm

I call this: Covering our derrieres before the great inflation of 2010s really gets out of hands.

[Chris Coles]

Re: Bernanke - We cannot grow out of our fiscal imbalances

I call this: Covering our derrieres before the great inflation of 2010s really gets out of hands.

Exactly my thoughts as I read it.

[bill]

Re: Bernanke - We cannot grow out of our fiscal imbalances

regarding state debt.
start 1:37:00
and 2:00:00
http://www.c-spanvideo.org/program/USEconomicOutlook16


Bens response same as EJ.
http://www.itulip.com/forums/showthr...363#post185363

iTulip's FIRE Economy Debt Repayment Rule #3 applies: bonds will be paid off even if every municipal service has to be cut, every other teacher, policeman, and firefighter laid off, the roads fill with potholes, and bridges have to be closed for safety reasons. You can already see it. Look around you. Fee will be layered upon fee. Fees for emergency services. Fees for snow clearing. Fees fro street cleaning. Permitting fees for heretofore unregulated activities, from home gardens to swimming pools. The most politically weak and vulnerable will bear the brunt of the new fees and taxes and spending cuts needed to maintain a flow of interest and principle payments on the bonds, but the flow will be maintained at all costs because the political power is in the hands of the bond holders.

[coolhand]

Re: Bernanke - We cannot grow out of our fiscal imbalances

Pfft. Let's see him call for major cuts in military spending.

Some not-insignificant portion of our debt continues to be funded by foreign sovereign creditors b/c of the perceived offer of help from t&/or the perceived threat of violence from, the US military. Niall Ferguson recently noted that the beginning of the end for empires has been when they must cut military spending to pay the debt; interestingly, this sentiment was echoed unsolicited to me by a US military officer recently.

In other words, in a twist of irony, history would suggest that it is entirely possible that the more you cut military spending, the greater the interest on our debt would go & the more we would pay for oil as emboldened foreign creditors walked away from US Treasuries & as the USD weakened.

I don't necessarily like "the rules of history", but I don't make them.

[BigBagel]

Re: Bernanke - We cannot grow out of our fiscal imbalances

Did he call for cuts in any specific area? I just read the snippet that Chris quoted. It might be argued that the Fed Chairman's role is to harangue Congress to get its fiscal house in order without presuming to suggest specific budget cuts. Or were you referring to his general support for the recommendations of the President's fiscal commission?

It would be inappropriate for the Fed chairman to recommend where spending should be cut. He didn't openly support the fiscal commission's recommendations but pointed to the commission's recommendations as a catalyst for the necessary discussion regarding addressing the imbalances. Estimated Federal spending for 2011 is
3,833.9 billion. The GOP is promising to cut 100 billion out of discretionary spending. The news report I saw called this drastic. It works out to a 2.61% cut in total spending by my math. They say that's just a start and it better be given that we finance 42% of Federal expenses with debt. I believe when the smoke clears this new congress will achieve virtually nothing in addressing the fiscal time bomb that's ticking.

[Chomsky]

Re: Bernanke - We cannot grow out of our fiscal imbalances

I believe in previous comments he has mentioned our unfunded liabilities, with no mention of defense.

[nero3]

Re: Bernanke - We cannot grow out of our fiscal imbalances

I think it's possible that Bernanke is wrong here as he have been before. Maybe things will turn out much better than the FED predicts, maybe growth will be at 4 % towards the end of 2011. Just like they were to optimistic before the downturn, now they are to pessimistic. That's the impression I get when I read the testimony. It's so many possible positive shocks they just can't see coming. It's a view inflation is getting out of hand, but maybe China takes that out of the picture, giving even a real boost to confidence as real wages will increase.

[Starving Steve]

Re: Bernanke - We cannot grow out of our fiscal imbalances

Starving Steve's vocabulary assignment for to-night--- spell and define:

1.) Fed-speak;
2.) New-speak;
3.) Greenspanese;
4.) quantitative-easing;
5.) dis-inflation;
6.) re-inflation;
7.) QE (2)
8.) zero interest-rate programme;
9.) core-inflation;
10.) seasonal-adjusted inflation;
11.) climate-hoax;
12.) AGW
13.) climate-forcing;
14.) green-energy plan;
15.) dead-zones;
16.) starvation;
17.) toxic oil;
18.) turd-world;
19.) cap-'n-trade;
20.) pump-priming;
21.) TARP
22.) smart-grids;
23.) solar-electric paint;
24.) bio-fuels;
25.) co-generation;
26.) TBTF
27.) corn-ethanol fuel;
28.) experts
29.) healthy-inflation;
30.) economic growth;
31.) ecologist;
32.) environmental-disaster;
33.) Al Gore's, "hockey-stick";
34.) Al Gore's, "settled-issue";
35.) economic recovery;
36.) supply-side economics;
*37.) NINJA loan;
*38.) trust-deed chain;
*39.) a mortgage-backed security


I could put-up about thirty additional-terms for definition, but this list should keep you kids busy over the week-end. Please use each term in a sentence the way it is being used now in the Great Recession. Terms with the asterisk are bonus-words for extra-credit!

[c1ue]

Re: Bernanke - We cannot grow out of our fiscal imbalances

Bernanke is just a hand puppet for the banksters - his interests lie solely in that realm.

He doesn't care about defense spending per se as defense and the banksters have a detente.

Some not-insignificant portion of our debt continues to be funded by foreign sovereign creditors b/c of the perceived offer of help from t&/or the perceived threat of violence from, the US military. Niall Ferguson recently noted that the beginning of the end for empires has been when they must cut military spending to pay the debt; interestingly, this sentiment was echoed unsolicited to me by a US military officer recently.

In other words, in a twist of irony, history would suggest that it is entirely possible that the more you cut military spending, the greater the interest on our debt would go & the more we would pay for oil as emboldened foreign creditors walked away from US Treasuries & as the USD weakened.

I don't necessarily like "the rules of history", but I don't make them.

There is some truth in this dynamic, but only some. The point is simple: it is quite feasible for the US to retain its overbearing military potential without spending money on vast numbers of troops in foreign nations.

Between the US navy (for infrastructure destruction) and the US nuclear arsenal (for North Korean style: stop or I'll shoot! shakedowns), it is not obvious to me at all that the entirety of US military spending must continue in order to achieve this military bullying capability.

Furthermore if the economic benefits of military bases are a factor - why not skip the inefficient middleman and just pay directly? The lease fees for said bases could be tripled or quadrupled - and the overall costs of said bases would still go down.

[flintlock]

Re: Bernanke - We cannot grow out of our fiscal imbalances

Some not-insignificant portion of our debt continues to be funded by foreign sovereign creditors b/c of the perceived offer of help from t&/or the perceived threat of violence from, the US military. Niall Ferguson recently noted that the beginning of the end for empires has been when they must cut military spending to pay the debt; interestingly, this sentiment was echoed unsolicited to me by a US military officer recently.

In other words, in a twist of irony, history would suggest that it is entirely possible that the more you cut military spending, the greater the interest on our debt would go & the more we would pay for oil as emboldened foreign creditors walked away from US Treasuries & as the USD weakened.
I don't necessarily like "the rules of history", but I don't make them.

I'd agree only using history as a lesson for the future veers off course when you factor in modern warfare with it's thermonuclear weapons. It simply does not take the kind of all out effort to project power like it did in the 3rd century. I agree the US empire must shrink, but it will be more of a "decline" than a "fall". We'll actually have to do business with other nations because they want to rather than because they feel intimidated. The real question is can we? Do we still have anything left to offer the world that they need or want?

[flintlock]

Re: Bernanke - We cannot grow out of our fiscal imbalances

Bernanke is just a hand puppet for the banksters - his interests lie solely in that realm.

He doesn't care about defense spending per se as defense and the banksters have a detente.



There is some truth in this dynamic, but only some. The point is simple: it is quite feasible for the US to retain its overbearing military potential without spending money on vast numbers of troops in foreign nations.

Between the US navy (for infrastructure destruction) and the US nuclear arsenal (for North Korean style: stop or I'll shoot! shakedowns), it is not obvious to me at all that the entirety of US military spending must continue in order to achieve this military bullying capability.

Furthermore if the economic benefits of military bases are a factor - why not skip the inefficient middleman and just pay directly? The lease fees for said bases could be tripled or quadrupled - and the overall costs of said bases would still go down.

Agree 100%. The current wars are inefficient and quite unnecessary in my opinion if the goal is merely to play economic bully. We overplayed our hand, and getting out intact has become more complicated than was first expected. They've found that fighting a politically correct war where cities are not leveled and nations are not destroyed is very difficult. Just like Vietnam, each leader thinks "just a few more troops and a few more months" will turn the tide.

[coolhand]

Re: Bernanke - We cannot grow out of our fiscal imbalances

I'd agree only using history as a lesson for the future veers off course when you factor in modern warfare with it's thermonuclear weapons. It simply does not take the kind of all out effort to project power like it did in the 3rd century. I agree the US empire must shrink, but it will be more of a "decline" than a "fall". We'll actually have to do business with other nations because they want to rather than because they feel intimidated. The real question is can we? Do we still have anything left to offer the world that they need or want?

Very good point...which I think also has nuances. Yes, I think the thermonuclear point is probably true as a deterrent to the major potential enemies with major strategic & population center targets, like Russia or China. But as we're seeing in Afghanistan, & as we would likely see in other areas where the goal is securing critical raw materials -thermonuclear devices are neither effective (we couldn't take out bin Laden in 1998 even with targeted cruise missiles, for example), or possible (nuking an area that you need for its underlying raw materials would seem counter-productive to this non-military person.)

But I think your point is well taken on things like aircraft carriers, which project power well in peacetime & are fantastically useful against guerilla-like enemies, but would likely go the way of the battleship circa 1947 in a real head-to-head with a major power (China, Russia.)

Finally - on your point re: is there anything the rest of the world still needs from us: There has been some suggestion that part of GW Bush's goal in getting corn-based ethanol through, despite its dubious EROI properties, is that it unquestionably raised the price of US corn (and by extension other crops like soybeans), which we export in large quantities, which helped slant the terms of trade back in our favor towards where they otherwise would've shaken out to.

While we may not offer as much, we still have lots of crops, fresh water & the best natural interior waterway system of any country in the world by virtue of our rivers. that may help over time.