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.
To read the entire article and view a graph go to http://finance.yahoo.com/tech-ticker/article/yftt_259145/Bernanke-Freaks-Out-About-Obama’s-Spending-and-Debt-Plans?tickers=xlf,dia,spy