Get your fiscal house in order (squeeze pensions) and let the Fed do its job... http://www.bloomberg.com/news/2011-...-remind-congress-deficit-bigger-than-qe2.html Federal Reserve Chairman Ben S. Bernanke is trying to make sure the U.S. central bank doesnÂft become a scapegoat for fiscal profligacy. Fed officials are warning that Congress needs to balance the nationÂfs budget, showing that policy makers are concerned about a loss of confidence in U.S. finances and want lawmakers to help prevent it, according to Dean Maki, chief U.S. economist at Barclays Capital Inc. Bernanke extended his campaign yesterday, telling the House Budget Committee Âganything that can be done now to change that pathÂh would have a Âggood impact on the current economyÂh and interest rates. ÂgThere is this tremendous fiscal problem looming, and Congress has to do something about it,Âh said Mark Gertler, a professor of economics at New York University who has co- authored research with Bernanke. ÂgIf they have a fixed amount of time, spend it solvingÂh that problem, rather than Âggrandstanding about the Fed.Âh The central bankÂfs plan to buy $600 billion in Treasury securities through June is Âga relatively modest policy undertakingÂh compared with balancing the $3.7 trillion budget, he said. The Fed sparked the harshest political backlash in three decades after announcing a second round of so-called quantitative easing on Nov. 3. Republicans, including House Speaker John Boehner of Ohio, said QE2 risks accelerating inflation, weakening the dollar and fueling asset bubbles. ÂgWhat is needed is very clear communication to the Congress at large and the American public,Âh that the program isnÂft Âgcrazy or highly unusual and that it made sense, but that it does involve some risk and thatÂfs being managed,Âh said Alfred Broaddus, former president of the Federal Reserve Bank of Richmond. ÂgYouÂfve got to be careful about turning this thing around.Âh ÂeCan Be OverdoneÂf By acknowledging that buying government debt Âgcan be overdone,Âh the Fed may bolster confidence that it will withdraw its record stimulus in time to avoid a surge in inflation, said Broaddus, who was president of the Richmond Fed from 1993 to 2004. Bernanke defended the bond-purchase program yesterday in his first House testimony since Republicans took control of the lower chamber last month. He repeated that Congress should adopt a long-term plan to control a federal budget deficit thatÂfs projected to reach a record $1.5 trillion this year. The Fed isnÂft monetizing the nationÂfs debt because Âgwhat weÂfre doing here is a temporary measure, which will be reversed,Âh Bernanke said. QE2 is Âgproviding significant support to job creation and economic growth.Âh Biggest Drop The unemployment rate fell to 9 percent in January from 9.8 percent in November, the biggest two-month drop since 1958, and gross domestic product rose at a 3.2 percent annual rate in the fourth quarter, compared with 2.6 percent in the third and 1.7 percent in the second. At the same time, Âgour nationÂfs fiscal position has deteriorated appreciably,Âh and adjustments Âgmust occur at some point,Âh Bernanke said yesterday. ÂgThe Fed wants to make clear itÂfs not going to underwrite large deficits in the medium term,Âh Maki said in a telephone interview from his New York office. The central bank is responding to critics whoÂfve said it Âgis allowing the Congress and the administration to run less-responsible fiscal policy,Âh he said. One such critic is Sarah Palin, the 2008 Republican vice- presidential nominee, who says sheÂfs considering a run for president in 2012. ÂgItÂfs time for us to ÂerefudiateÂf the notion that this dangerous experiment in printing $600 billion out of thin air, with nothing to back it up, will magically fix economic problems,Âh she wrote in a letter to the Wall Street Journal published Nov. 18. Curb Spending So far, buyers of Treasury securities havenÂft forced Congress to curb its spending by making it expensive for the nation to borrow. The yield on the 10-year Treasury note was 3.65 percent late yesterday in New York, lower than its average of 5.25 percent during the last decade, according to data compiled by Bloomberg. ÂgUnfortunately, thereÂfs no sense of urgency right now,Âh said John Lonski, chief economist at MoodyÂfs Capital Markets Group in New York. ÂgOnce you reach the point where concerns about the federal budget deficit render financial markets dysfunctional, then Congress will take action pronto.Âh Representative Paul Ryan, the Wisconsin Republican who chairs the budget panel and offered his own plan last year for cutting spending, asked Bernanke during his testimony if Congress could aid short-term economic growth with a plan to control spending. ÂgThatÂfs correct,Âh Bernanke said. Inflation Launched Bernanke may not have won Ryan over on QE2, though. Ryan said during the hearing heÂfs concerned that ÂgyouÂfre going to see inflation after itÂfs already been launched.Âh Representative Ron Paul, a Texas Republican who has advocated abolishing the central bank, said yesterday that the FedÂfs policies arenÂft working. ÂgThey havenÂft been very efficient in producing jobs,Âh and prices Âgreally arenÂft all that stable,Âh Paul said at a hearing he held titled ÂgCan Monetary Policy Really Create Jobs?Âh Since Bernanke fueled speculation about additional asset purchases during an Aug. 27 speech in Jackson Hole, Wyoming, inflation expectations have climbed. The breakeven rate for 10- year Treasury Inflation Protected Securities, the yield difference between the inflation-linked debt and comparable- maturity Treasuries, has risen to 2.33 percentage points from 1.63 percentage points, Bloomberg data show. The central bank prefers an inflation rate of about 2 percent. Congressional Legacy ÂgDeficits and the unfunded liabilities of Medicare and Social Security are not created by the Federal Reserve; they are the legacy of Congress,Âh Dallas Fed President Richard Fisher said in a Feb. 8 speech. Fisher has expressed doubts about the efficacy of quantitative easing and said this week heÂfll oppose further asset purchases after the planned $600 billion is completed. The Fed Âgwould be more comfortable running a very easy monetary policy if it could see firm evidence that a more- sustainable fiscal situation was being put in place on a long- term basis,Âh Maki said. Most Fed officials arenÂft seeking Âgsharp, immediateÂh cutbacks, given that they want the economic recovery to gain traction, he said. Quantitative easing is Âghardly a panaceaÂh and would benefit from fiscal support, Fed Vice Chairman Janet Yellen said in New York speech Dec. 1. ÂgWe would be wise to heed the abundant empirical evidence of the superiority of taking action before a fiscal crisis is upon us,Âh Richmond Fed President Jeffrey Lacker said Feb. 8 in a speech in Newark, Delaware. $35 Billion in Cuts House Republicans have started looking at reducing some expenditures, announcing last week that they will seek $35 billion in cuts. WashingtonÂfs spending spree is over,Âh Ryan said in a Feb. 3 statement. While Bernanke and other Fed officials have voiced concern that the nationÂfs financial situation is unsustainable, they have stopped short of prescribing how lawmakers should fix it. ÂgThe composition of spending and taxes is a Congressional prerogative,Âh Bernanke said yesterday. Policy makers must Âgbe very careful about getting intoÂh too much detail with fiscal recommendations because that also could politicize the Fed, Broaddus said. BernankeÂfs predecessor, Alan Greenspan, was criticized for expressing his opinions on matters such as Social Security, he said. ÂeDifferent ToneÂf ÂgChairman Bernanke has set a different tone than Chairman Greenspan in that he has consistently avoided making near-term fiscal-policy recommendations,Âh Maki said. ÂgHeÂfs taking this approach in part to preserve the FedÂfs independence and avoid an image of partisanship.Âh Congress shouldnÂft become too involved in monetary policy, either, because that could damage the credibility and effectiveness of the Fed, Lonski of MoodyÂfs said. ÂgTheir primary focus ought to be on fiscal policy, not on monetary policy,Âh Lonski said. ÂgYou have to worry about what you have direct control over.Âh
Dear John Boehner, Ron Paul, Sarah Palin. Shut up! Sincerely, Nutmeg ------------------- How ordinary to hire or employ someone who understands the situation and then have that person second guessed. Let Ben do his job. What would you suppose bernankes two fields of expertise are? What are the three wise men two fields of expertise? (In this case two wise men and a wise woman).