“Debt is the fatal disease of republics, the first thing and the mightiest to undermine governments and corrupt the people”
-Wendell Phillips
Today Federal Reserve Chairman Ben Bernanke testified before the House Budget Committee, and said that the Fed will do whatever is necessary to increase financial stability and foster economic growth and recovery. “Our ongoing international cooperation sends an important signal to global financial markets that we will take the actions necessary to ensure stability and continued economic recovery,” Bernanke said to the committee.
Bernanke did not address fiscal policy specifically, focusing more on larger economic issues. Earlier this week Bernanke said that the Federal Reserve may need to raise interest rates before unemployment is totally under control.
He said that the European debt crisis should have a “modest” impact on the U.S. economy assuming markets “continue to stabilize”. A few days ago Bernanke expressed concerns about the toll that unemployment was taking on Americans. He reiterated that the rate of growth present in the economy will not be enough to create significant numbers of jobs in the near future.
Bernanke also addressed the topic of government debts. “Achieving long-term fiscal sustainability will be difficult,” Bernanke said. “But unless we as a nation make a strong commitment to fiscal responsibility, in the longer run, we will have neither financial stability nor healthy economic growth.” The situation in Europe right now provides an object lesson in the potential ramifications of unfettered deficit spending.
“To avoid sharp, disruptive shifts in spending programs and tax policies in the future, and to retain the confidence of the public and the markets, we should be planning now how we will meet these looming budgetary challenges,” Bernanke remarked.
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