Wednesday, December 2, 2009, 11:23PM ET - U.S. Markets Closed.
- Home
- Tech Industries
- Topics
- Reporters
- Subscribe
Bernanke Freaks Out About Obama's Spending and Debt Plans
Posted Jun 04, 2009 04:17pm EDT by Henry Blodget in Investing, Recession, BankingFrom The Business Insider, June 4, 2009:
Ben Bernanke's language yesterday on the future of the economy and the risks of our ballooning debt was startlingly frank coming from a Fed Chairman.
Specifically, Bernanke warned that the recovery is likely to be weak and that Obama and Congress need to get spending under control or the interest payments will start to destroy us.
He agreed that the size of the deficit is contributing to rising interest rates (very startling point, especially in light of Treasury's happy chirps that rates are rising because the economy is recovering.) He also cast doubt on the effectiveness of the stimulus programs.
Most importantly, Bernanke also raised concern about our impending debt-to-GDP ratio of 70%, which is well below the Obama administration's (probably optimistic) forecast of 100% for the next decade.
As a consequence of this elevated level of borrowing, the ratio of federal debt held by the public to nominal GDP is likely to move up from about 40 percent before the onset of the financial crisis to about 70 percent in 2011. These developments would leave the debt-to-GDP ratio at its highest level since the early 1950s, the years following the massive debt buildup during World War II.
Here's how this 70% compares to the ratio projected by Obama's OMB:
In the past several weeks, John Taylor, Niall Ferguson, John Mauldin and others (see links below) have clanged alarm bells about the size of our deficit. Today, PIMCO's Mohammed El-Erian joins this chorus:
Mr Bernanke...[uses] strong words, and appropriately so given the worrisome fiscal outlook facing the US. By necessity, Mr Bernanke will increasingly be in the business of countering monetisation and inflation concerns.
Indeed, the markets have already fired a couple of clear warning shots in the last couple of weeks, as illustrated by recent moves in US bonds and the dollar.
The chairman’s challenges on this count are neither easy nor amenable to quick solutions. Moreover, as markets increasingly look into the underlying factors, as inevitably they will, they will recognise the difficulty that the government faces in credibly committing to the needed primary fiscal adjustment in the absence of high economic growth.
The bottom line is that we should come away from Mr Bernanke’s testimony with at least two conclusions: the chairman seems more cautious about the growth outlook when compared with other recent public statements; and he wants to push fiscal sustainability issues clearly away from the Fed’s domain and back where they belong, with Congress and the administration.
See also from The Business Insider:
Our Exploding Deficit Will Kill The Economy
Niall Ferguson: US Borrowing Will Be Devastating
176 Comments
franck s - Thursday June 04, 2009 04:24PM EDT
Bernanke freaks out!!?? Bernanke freaks out about deficit spending??!! The smoke is choking me...choking me I tell you!!!
Jim - Thursday June 04, 2009 04:31PM EDT
He's covering himself and rightfully so, if it all falls apart he can blame Obama and Congress!
RayP - Thursday June 04, 2009 04:32PM EDT
Finally, a small voice of REASON! Even Ben is getting concerned. SPENDING has always been the problem with Congress. Stop raising taxes and cut cost. Start with our exalted leaders pay. That includes the Pres, the Cabinet, all Congresspersons and entitlements. Yep, it's a cruel world......
Yahoo! Finance User - Thursday June 04, 2009 04:34PM EDT
This is why the smart money is going to where growth is certain...china and brazil will be the world's economic powers 20 years from now
SICK OF ALL OF IT - Thursday June 04, 2009 04:34PM EDT
Obama has no clue what he is doing. All the 18 year olds voted the guy in office cause he can play basketball.
Yahoo! Finance User - Thursday June 04, 2009 04:34PM EDT
He should be worried he is on the verge of being set up as the fall guy for the administrations reckless spending spree. Then all the democrats can blame him for all their problems and keep the sheeple in line.
RayP - Thursday June 04, 2009 04:35PM EDT
Finally, a small voice of reason. STOP THE SPENDING!
Pieter - Thursday June 04, 2009 04:36PM EDT
Buy gold and goldshares. It's honest money that will back up a currency in a few years and then the demand will be very strong.
Ron - Thursday June 04, 2009 04:37PM EDT
yea yea yea.... Bernanke has no credibility anymore in my eyes! He had no clue that this whole mess was coming, and all he knows how to do is pump pump pump! Did he even bat an eye when oil was at $150/brl? No! and Now oil and gas are on their way back up, and he will just sit and watch while WS makes money hand over fist!! What a joke.
Heroine Worshipper - Thursday June 04, 2009 04:38PM EDT
He said he wouldn't monetize the debt & then monetized $8,000,000,000 of debt the next day. Slick move, Dick.
JeanR - Thursday June 04, 2009 04:41PM EDT
Boy, the trillion we wasted in Iraq would be useful now. The surgeons have stabilized the patient for now...its how long will it take for the patient to heal and be "normal" again. Years...Years. It means lower standards of living...sorry no second homes, or 5 vacations a year. No private colleges for you...see you at umass. And finally, the baby boomers will be working as Walmart greeters two weeks before they die. Nice...really, really nice.
EdwardJ - Thursday June 04, 2009 04:45PM EDT
I guess someone will want to blame Bush for all the recent spending. Ha!
EdwardJ - Thursday June 04, 2009 04:46PM EDT
I guess someone will want to blame Bush for all the recent spending. Ha!
Ike - Thursday June 04, 2009 04:50PM EDT
Everyone has to remember that when the Rep. came into office in 2001, we had a surplus- 8 years later the Bush boys, has put us deep into dept, trouble around the world - now wants to blame someone only been in office for a few months. The problem with Americans is they tow the party line - screw the party lines and support what and who is doing right for the country.
KG - Thursday June 04, 2009 04:51PM EDT
Does all this spending etc remind anyone else of sim city 2000 when you got tired of the game, you just raised crazy taxes and other things in order to destroy the city and start over?
Barracuda B - Thursday June 04, 2009 04:54PM EDT
Interest rates are going up because of dollar value going down, not because of the recovery. Dollar loosing 15% against other currencies in the last two months contributed a lot to stock market rally too. If stocks stayed flat in Euro, then they must increase 13% by dollar terms. Economy going down at a slower pace does not mean growth. We are still going down and nobody knows when we will start going up. Media and the government lie all the time. Markets rallying on data which are revised downward later on does nt look healthy in the long run.
MichaelM - Thursday June 04, 2009 04:55PM EDT
Bernanke should be concerned about developments at the treasury. I don't have a problem with that. But, it is like the pot calling the kettle black. He should focus on getting his own house in order before criticizing other governement entities.
fedup52 - Thursday June 04, 2009 04:59PM EDT
Only 20 of us even took time to read the article. Bernanke gave Obama credibility at one point and now he wants to withdraw? Every thinking adult on the planet knows you can't spend your way out of a downturn. Only cutting costs - yes salaries of government employees especially and reducing their numbers (so the ones left actually have to perform!); gee ......isn't that what they say the car companies have to do? Congress originally had to have the public approve any raises, but slick that they are they now decide all salaries. And with a million dollar expense account, why do we need over 600 legislators? That is for each of them they get a cool million for expenses. Cut off their expense accounts and we would save three quarters of a billion dollars a year. Also take and put a meter on Air Force one that only allows 1500 miles of travel, and we would save another equal amount for a President that spends more time out of WAshington than in it. I have a strong stomach put this is pushing the limits. Bernake is beginning to think maybe he will be the goat.
Want to post a comment? Sign in now to begin.
Recent Posts
Copyright/IP Policy - Terms of Service - Privacy Policy - Help
Quotes delayed, except where indicated otherwise. Delay times are 15 mins for NASDAQ, NYSE and Amex. See also delay times for other exchanges.
Quotes and other information supplied by independent providers identified on the Yahoo! Finance partner page. Quotes are updated automatically, but will be turned off after 25 minutes of inactivity. Quotes are delayed at least 15 minutes for NASDAQ, NYSE and Amex. See also delay times for other exchanges. Real-Time continuous streaming quotes are available through our premium service. You may turn streaming quotes on or off. Fundamental company data provided by Capital IQ. Financials data provided by Edgar Online. Historical chart data and daily updates provided by Commodity Systems, Inc. (CSI). International historical chart data, daily updates, fund summary, fund performance, dividend data and Morningstar Index data provided by Morningstar, Inc. Analyst estimates data provided by Thomson Financial Network. All data provided by Thomson Financial Network is based solely upon research information provided by third party analysts. Yahoo! has not reviewed, and in no way endorses the validity of such data. Yahoo! and ThomsonFN shall not be liable for any actions taken in reliance thereon. All information provided "as is" for informational purposes only, not intended for trading purposes or advice. Neither Yahoo! nor any of independent providers is liable for any informational errors, incompleteness, or delays, or for any actions taken in reliance on information contained herein. By accessing the Yahoo! site, you agree not to redistribute the information found therein.
Jack - Thursday June 04, 2009 04:23PM EDT
what happened tp all the "green shoots" talk from Helicopter Ben? All the money he printed and gave to the banks and HE is talking about deficits to congress? Oh, the banks already sold the stock to the public and raise billions. We can stop pretending now?