Since when did Fed chairman Ben Bernanke publicly care so much about the federal deficit?
Bernanke almost sounded like a deficit hawk during yesterday’s testimony as he called on lawmakers to restore fiscal balance over the long-term, former labor secretary Robert Reich writes on his blog.
“This from a Fed Chair who’s loosened the money supply more than any Fed chair in recent history, printing money as if it were going out of style,” he says. “What’s going on?”
Bernanke’s likely trying to assure investors he won’t let inflation get out of control, Reich notes.
While his testimony was good, former IMF chief economist Simon Johnson says Bernanke didn’t push his points hard enough.
“US fiscal policies helped break the recent panic by showing that the government will support aggregate spending, irrespective of what the private sector fears,” Johnson writes at The Baseline Scenario blog.
However, he notes the government needs to demonstrate that national debt isn’t on an explosive path. “We should also worry about the Fed, of course, because there is no indication that they are ready, willing or able to curtail their quantitative easing if the real economy definitely turns more positive,” Johnson notes.
Ultimately, it’s sort of ironic that Bernanke’s warning about the dangers of the expanding federal budget has finally put this issue on center stage.
Doom mongers like Jim Rogers, Peter Schiff and Nouriel Roubini have been warning investors for quite some time about impending problems related to deficits, but now that Bernanke has spoken, everyone seems all ears, FT’s Alphaville blog says.
“What an interesting turn of events has transpired in about the space of a week,” blog says. “June might as well become known as ‘the month the world discovered the deficit problem.’”
And it’s not only federal officials who’re worried as blog says the amount of analysts who’re now preaching this issue has “reached fever pitch.”
