Page 1

Federal Reserve's Ben Bernanke Confirms: “If We Were To Tighten Policy, The Economy Would Tank” Mac Slavo July 19, 2013 Financial analysts have opined that the United States is well on the road to recovery. They cite various data points to make the case that the multi-trillion dollar bailouts and stimulus have brought us back from the brink of a collapse so serious that Congressional leaders had been told that should the bailouts fail, there was a real possibility of martial law being declared. We’re doing so well, in fact, that just a couple of years ago President Obama assured the nation of our progress, claiming that we “reversed the recession, avoided a depression, [and] got the economy moving again.” But were one to take a step back from the rhetoric of talking heads, political leaders and so-called Wall Street experts, a completely different picture begins to emerge. Just this week it was announced that not only are housing starts plummeting, but permit applications reported their “largest miss in history,” an indicator that the economy is not as healthy as it has been made out to be. And, while stock markets are hitting all-time record highs, what’s curious is that some of the world’s largest companies, including Intel, IBM, Google, Ebay and FedEx, are reporting significant consumer pull back and earnings below analyst expectations. And if that hasn’t convinced you, then here is the reality of the situation directly from Federal Reserve Chairman Ben Bernanke, the architect of the most massive economic recovery “plan” ever devised in the history of the world. “I don’t think the Fed can get interest rates up very much, because the economy is weak, inflation rates are low,” Bernanke told the House Financial Services Committee. “If we were to tighten policy, the economy would tank.” (Courier Mail)

What Helicopter Ben is saying, despite his pledge to start pulling back the monthly $85 billion (Over $1 Trillion yearly) in stimulus spending by mid2014, is that if they stop injecting financial and bond markets with capital, the whole system is going to fall apart, just like it was going to in 2008. There is no way out for Ben Bernanke’s policies. We’re toast either way. If we keep printing, we eventually hyperinflate our currency to oblivion, leaving our entire system of commerce at a standstill. If we stop printing the system “tanks,” as noted by the Chairman. The end result, any way you slice it, is complete and total detonation of our financial, economic and monetary systems: His answer? The economy will tank. Did that tell you everything you needed to know? It should have. He can’t exit. Not now, not ever. Which paradoxically, means he will exit because if an outcome is inevitable then the longer you wait and the more distortion you pump in before it happens the worse it is and he cannot avoid owning the outcome either way. Think it through folks. Then get ready, because it’s coming. Following the 2008 crisis, former Treasury Secretary Henry Paulson was quoted as saying that the United States was on the brink of a total collapse, something his successor Tim Geithner echoed in an open letter to Congress. This is happening, and our Federal Reserve Chairman just confirmed it. Ignore it at your peril.

The U.S. Government Will Borrow Close To 4 Trillion Dollars This Year Michael Snyder The Economic Collapse July 19, 2013 When you add maturing debt to the new debt that the federal government is accumulating, the total is quite eye catching. You see, the truth is that the U.S. government must not only borrow enough money to fund government spending for this year, it must also "roll over" existing debt that has reached maturity. Of course the government never actually pays any of that debt off. Instead, it essentially takes out new debts to cover the old ones. So the U.S. government is actually borrowing far more money each year than most Americans realize. For fiscal year 2013, the U.S. budget deficit will be about $845 billion, but on top of that the government will also have to borrow about 3 trillion dollars to pay off old debt that is maturing. Overall, the U.S. government will borrow close to 4 trillion dollars this year, and that number will likely be even higher next year. That is not going to cause a crisis as long as interest rates stay super low, but if interest rates begin to rise substantially, the game will change dramatically. When the government borrows money, it has to pay it back someday. Back in the old days, the federal government used to issue lots of debt that would not mature for a very long time. But in recent years things have been very different... In order to fund the government, the Treasury Department periodically auctions Treasury securities with various maturities ranging from 30-day Treasury bills to 30-year Treasury bonds, with 2-3-5-7-year and 10year Treasury notes in between. It used to be that the bulk of Treasury borrowing was done in the longer-term instruments with maturities of at least 10 years. In more recent years, however, this trend has shifted more toward shorter-term Treasury securities. There are pros and cons to both strategies. Generally speaking, the shorter maturities are considered more risky since short-term interest rates can vary frequently. Shorter-term maturities obviously have to be rolled over much more often. That raises the

risk that there might not be enough buyers when the government needs them. At this point, the average maturity of outstanding government debt is only 65 months, and only about 10 percent of all Treasury debt matures outside of a decade. So what does that mean? It means that the federal government must constantly roll over massive amounts of debt. Once again, this is not too much of a problem as long as interest rates stay super low, but as John Cochrane pointed out, if rates start rising back to "normal" levels things could get quite hairy very quickly... Here’s the nightmare scenario: Suppose that four years from now, interest rates rise 5 percent, i.e. back to normal, and the US has $20 trillion outstanding. Interest costs alone will rise $1 trillion (5% of $20 trillion) – doubling already unsustainable deficits! This is what happened to Italy, Spain, and Portugal. Don’t think it can’t happen to us. It’s even more likely, because fear of inflation – which did not hit them, since they are on the Euro – can hit us. Sadly, those running things appears to be quite clueless. For example, retiring U.S. Representative Michele Bachmann recently asked Federal Reserve Chairman Ben Bernanke why the national debt has remained frozen in place for 56 straight days even though we have been borrowing lots of money. Bernanke seemed to have no idea how to answer that question... As Federal Reserve Chairman Ben Bernanke testified before the House Financial Services Committee Wednesday, Bachmann asked how there could be no increase reported in the total debt when the government is racking up about $4 billion a day in new debt. “After nearly 10 years as the head of the Federal Reserve, Chairman Bernanke could not answer my question today in Financial Services Committee,” Bachmann told WND. She wondered if there’s a political motive. “I asked whether the Treasury Department was cooking the federal government’s books as it was reported that the Feds debt balance sheet remained at $16,699,396,000,000 for 56 days straight, presumably so the Treasury Department wouldn’t officially register that once again the Congress had exceeded its legal borrowing limits.” For the moment, the federal government is able to recklessly borrow and spend money and investors are rewarding this behavior with super low interest rates. Unfortunately, this state of affairs is completely and totally unsustainable. At some point global financial markets will begin to behave rationally, and when that happens it is going to mean a tremendous amount of pain for the United States. Over the past decade, the U.S. government has added more than 11 trillion dollars to the national debt at a time when the U.S. economy has been steadily declining. Anyone that thinks that we can continue to pile up more debt like this indefinitely does not know what they are talking about. The following are some more statistics about the U.S. national debt for you to consider... -Back in 1980, the U.S. national debt was less than one trillion dollars. Today, it is rapidly approaching 17 trillion dollars. -During Obama's first term, the federal government accumulated more debt than it did under the first

42 U.S presidents combined. -The U.S. national debt is now more than 23 times larger than it was when Jimmy Carter became president. -If you started paying off just the new debt that the U.S. has accumulated during the Obama administration at the rate of one dollar per second, it would take more than 184,000 years to pay it off. -If right this moment you went out and started spending one dollar every single second, it would take you more than 31,000 years to spend one trillion dollars. -If you were alive when Jesus Christ was born and you spent one million dollars every single day since that point, you still would not have spent one trillion dollars by now. -Some suggest that "taxing the rich" is the answer. Well, if Bill Gates gave every single penny of his entire fortune to the U.S. government, it would only cover the U.S. budget deficit for 15 days. -If the federal government used GAAP accounting standards like publicly traded corporations do, the real federal budget deficit for 2011 would have been 5 trillion dollars instead of 1.3 trillion dollars. -The United States already has more government debt per capita than Greece, Portugal, Italy, Ireland or Spain does. -At this point, the United States government is responsible for more than a third of all the government debt in the entire world. -The amount of U.S. government debt held by foreigners is about 5 times larger than it was just a decade ago. -The U.S. national debt is now more than 37 times larger than it was when Richard Nixon took us off the gold standard. -The U.S. national debt is now more than 5000 times larger than it was when the Federal Reserve was first created. -Boston University economist Laurence Kotlikoff is warning that the U.S. government is facing a gigantic tsunami of unfunded liabilities in the coming years that we are counting on our children and our grandchildren to pay. Kotlikoff speaks of a "fiscal gap" which he defines as "the present value difference between projected future spending and revenue". His calculations have led him to the conclusion that the federal government is facing a fiscal gap of 222 trillion dollars in the years ahead. For the moment everything is fine because interest rates are incredibly low and the mockers in the "deficits don't matter" fan club are having a field day. But what is going to happen when interest rates return to rational levels? How will the U.S. government be able to borrow the trillions of dollars that it needs to borrow every single year? That is why it is so important to watch interest rates. When they start skyrocketing, big trouble is ahead.


Federal Reserve's Ben Bernanke Confirms: “If We Were To Tighten Policy, The Economy Would Tank”  

Financial analysts have opined that the United States is well on the road to recovery. They cite various data points to make the case that t...

Read more
Read more
Similar to
Popular now
Just for you