Bernanke Points to 'Increased Possibility of a Sudden Fiscal Crisis'

[Geee]

CNSnews:

(CNSNews.com) – Federal Reserve Chairman Ben Bernanke said that the current trajectory of the federal budget – marked by large annual deficits – was “clearly unsustainable” and that “serious economic consequences” could result.

 

 

“Having a large and increasing level of government debt relative to national income runs the risk of serious economic consequences,” Bernanke told the Senate Budget Committee Tuesday.

 

 

“Even the prospect of unsustainable deficits has costs, including an increased possibility of a sudden fiscal crisis. As we have seen in a number of countries recently, interest rates can soar quickly if investors lose confidence in the ability of a government to manage its fiscal policy.”

 

 

Bernanke said that while nobody knows when a fiscal crisis will come, it is surely “ever closer.”

“Although historical experience and economic theory do not indicate the exact threshold at which the perceived risks associated with the U.S. public debt would increase markedly, we can be sure that, without corrective action, our fiscal trajectory will move the nation ever closer to that point.”