The Bankwatch

Tracking the consumer evolution of financial services

Bernanke is concerned about budget deficits

Fed Chairman Bernanke picks his words carefully here as the US treads that line between economic recovery and much higher interest rates which would produce other unintended consequences such as stifling growth, currency value shifts or inflation.

Bernanke calls for action on deficits | FT

Ben Bernanke on Wednesday called on Congress to take action now to bring down long term US budget deficits, warning that the bond market was concerned about rising US government debt.

The Federal Reserve chairman said the recent increases in bond yields “appear to reflect concern about large federal deficits” as well as improved optimism about the economy and other factors.

Here is the full testimony before the Committee on the Budget, U.S. House of Representatives, Washington, D.C. June 3, 2009

More analysis here.

Relevance to Bankwatch:

As plans are made, these are additional data points and views that point to a much different 2 – 5 years upcoming than we have experienced.

Written by Colin Henderson

June 3, 2009 at 12:17

Posted in economy, US

Tagged with , , ,

5 Responses

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  1. […] a comment » Following on the testimony from US Bernanke today, similar moves in Japan, the next largest world economy (for the moment), to […]

  2. I don’t get it. Surely he knew that this would be the result of all that money they’ve been printing at record speed and all that borrowing from themselves they’ve been doing. It’s not rocket science.

    Take a look at the gold graph on the widget http://www.learcapital.com/exactprice and it’s obvious for a while now that investors have recognized that FED’s practices are leading to a killing of the dollar and into major inflation. Gold is on the rise. People turn to it to protect their money with paper money is in crisis. And crisis is where I’m afraid we are finding ourselves.

    Hal

    June 4, 2009 at 10:21

  3. @Hal … I agree. The size of the effort in the money markets will not go by without impact.

    Colin Henderson

    June 6, 2009 at 02:10

  4. @Colin

    The difficulty of course is timing the failure. I continue to be worried about the California money situation and can’t help but think socially there is a time bomb waiting to go off. That poor state is bleeding money and with the moves the state government is making in regard to releasing prisoners because they can’t afford to keep them incarcerated is just a match waiting to set it all off. And I think it will ripple across the nation. Add to that this financial woes and things could get bad quick.

    Hal

    June 8, 2009 at 09:05

  5. There is real potential for catastrophe in areas. California for one – the impact of GM for another. I was reading this morning on RGE Monitor that GM at its peak was accountable for enough economic impact, that its bankruptcy and downsizing will alter whole economies, and regions in US.

    * GM’s application on June 1, 2009 for Chapter 11 protection from its creditors, triggered the biggest industrial bankruptcy in history. Until 2008, when it was overtaken by Toyota, GM was the world’s biggest carmaker, producing well over 9 million cars and trucks a year in 34 different countries. It has 463 subsidiaries and employs 234,500 people, 91,000 of them in America, where it also provides health-care and pension benefits for 493,000 retired workers. In America alone, it spends $50 billion a year buying parts and services from a network of 11,500 vendors and pays $476 million in salaries each month (Economist)

    * GM is now selling off its many of its assets, as part of global auto consolidation and perhaps providing the chance for some countries to get a foothold in new countries. On a macroeconomic basis, the net result will likely be job losses which could weigh on growth in the most affected regions and countries. GM has been selling assets including both foreign and U.S. brands but not all the deals are finalized. The largest such deal concerned Opel, its European operations

    Colin Henderson

    June 8, 2009 at 10:07


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