Bernanke's Economic Cure: More Deficit Spending, Re-Inflate Housing Bubble
(The New American) -- by Thomas R. Eddlem --
Federal Reserve Open Market Committee Chairman Ben Bernanke's told the congressional Joint Economic Committee of Congress October 4 that he has the remedy for the ailing economic recovery he admits is "close to faltering": More of the same deficit spending, monetary stimulus, and work to re-inflate the housing bubble.
Bernanke acknowledged to Congress that deficit spending is out of control. "One crucial objective is to achieve long-run fiscal sustainability. The federal budget is clearly not on a sustainable path at present," he told members of the House-Senate joint committee. The Fed Chairman termed the work of Congress' other joint House-Senate "Super-Congress" committee, charged with cutting some $1.5 trillion of the estimated $8-9 trillion in expected deficits over the next 10 years, "a substantial step; however, more will be needed to achieve fiscal sustainability.... In sum, the nation faces difficult and fundamental fiscal choices, which cannot be safely or responsibly postponed."
By those remarks, Bernanke didn't mean that federal, state, and local governments should balance their budgets and stop using deficit spending to continue their stranglehold on the credit markets. To the contrary, Bernanke's prescription for the faltering economy is more of the same. Governments must, Bernanke contended, continue deficit spending and hire more people while the Fed tries to re-inflate the housing bubble and loosen credit markets with more "quantitative easing" and interest rate suppression.
Bernanke noted that governments — especially state and local governments, which are shedding jobs and balancing their budgets — need to spend and borrow more in the short term in order to "avoid fiscal actions that could impede the ongoing economic recovery." Bernanke fretted about the "increasing drag being exerted by the government sector. Notably, state and local governments continue to tighten their belts by cutting spending and employment in the face of ongoing budgetary pressures, while the future course of federal fiscal policies remains quite uncertain."
Governments living within their means is a bad thing to followers of the Keynesian school of economics, to which Bernanke adheres. This contrasts with the free market Austrian school, which holds that deficit spending and monetary inflation and interest rate suppression creates economic dislocations, including especially the 2001-2007 housing bubble and its subsequent housing bust...MORE...LINK