Wednesday, June 3, 2009


Bernanke: "I Was Flipping Through My Grandson's Intro Text, and Realized Deficits Push Up Interest Rates"

Something is really fishy with all this news coverage. "Extra, extra! Read all about it! Fed chief tells feds to stop borrowing binge!"

Didn't Bernanke say a few months ago that the stimulus package was crucial? In fact, if you go through the article and see the list of factors he discusses (entitlement spending, projected growth of total federal debt as a share of the economy over the next decade, etc.) they are all the same now as they were two months ago. So why is Bernanke all of a sudden warning everyone about the dangers of deficits?

The only thing that has changed is that ten-year yields have risen. So are you telling me the Ben Bernanke who testified in favor of the stimulus, wasn't aware at the time that trillion-dollar deficits would push up interest rates?

Oh wait, don't tell me. Bernanke's approach to deficits is like his approach to reserves: Sure go ahead and commit to a crazy amount. Then, when the Econ 101 effects kick in, simply declare, "This is bad!" and try to reverse course.

Isn't he just trying to talk his policy down? I think he's trying to manage expectations. I understand that he can't talk his way out of everything, but I just don't think he has many options at this.
I think Benny got the Tea Party brochure I mailed him.
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