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


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									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
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
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 mid-
                                                                2014, 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
                                                                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
                                                                      His answer? The economy
                                                                      will tank.

                                                                      Did that tell you
                                                                      everything you needed to

                                                                      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 10-
      year 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
-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


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