Fed chairman Ben Bernanke told Congress today that he’s worried about massive federal budget deficits:
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.”
Whence this sudden concern about fiscal responsibility (on the day after the president leaves the country)? Might it be that the Fed chairman is a little light headed after last week’s $100 billion dollar borrowing and the subsequent spike in rates? Not likely. Bernanke has seen this coming for months. Assuming that he still presumes even a pretense of the independence that politicians like to claim the Fed possesses it may be that the Chairman wants to get on record now about the looming train wreck. How else to explain this sudden epiphany of fiscal responsibility?
It’s only a matter of time before some of the responsible parties (read:Democrats or The Fed) start crab walking on the spending insanity and attempted bond market manipulation that consumed Washington from January through May. Today’s preliminary unemployment numbers make it hard to argue that economic growth will reach the necessary levels required to reduce the deficit by next year.