Tuesday, October 5, 2010

Bernanke Warns U.S. Deficit is Unsustainable But No One is Listening

Fed Chairman Helicopter Ben Bernanke is now publicly warning that the U.S. budget deficit is "unsustainable" and that there is no reason to expect the U.S. economy to grow out of its fiscal mess anytime soon.

This is wonderful news.  Except that no one, not even his own Fed members, are listening to him.

For example, President of the Chicago Fed Charles Evans is now arguing for, and I quote, "much more easing" and "much more accommodation than we currently have in place."

Does anyone, ANYONE, really believe more bond repurchases are going to spur U.S. economic growth when TRILLIONS of dollars of fiscal stimulus has already failed?

The financial markets ignore Bernanke because he has NO credibility left on the subject of monetary policy.  Congress ignores him on the deficit because he merely accommodates their spending.  Why reform the budget or make unpopular spending cuts when Bernanke and his Fed will just create new money on demand?

It's nice to hear Mr. Bernanke finally agreeing with me on the deficit.  I have only been arguing against excessive Federal spending for, um, like THIRTY YEARS now.  I'm happy he has found religion, better late than never I guess.

But Helicopter Ben reminds me in many ways of former U.S. Senator William Alden Smith, who was one of the Congressional investigators looking into the sinking of the Titanic.  Senator Smith (that's him in the picture above) will forever be remembered for the many truly dumb questions he asked during this inquiry.  A well intentioned and educated man, he was just out of his depth when trying to investigate the sinking of an ocean liner in the middle of the Atlantic.

This is typical of the questions he asked during the investigation:

"If the Titanic had watertight compartments, why didn't the passengers of the ship take shelter there and await rescue?"

See the parallels?