Bernanke Admits Borrowing and Spending are Disastrous for Economy
New American – Raven Clabough – 4/13/2012
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
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. U.S.
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 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. United States
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