Fed Chairman Warns of Budget Deficit

[La_Serpiente]

Fed Chairman Warns of Budget Deficit

WASHINGTON - Federal Reserve (news - web sites) Chairman Alan Greenspan (news - web sites) warned on Wednesday that mushrooming federal budget deficits eventually could threaten the national economy, which he said had shown "impressive gains."

Greenspan, delivering the central bank's twice-a-year economic report card to Congress, offered a fairly upbeat assessment and expressed hope companies would step up hiring. Hiring has been painfully slow and become a political sore spot for President Bush (news - web sites).

Against that backdrop, Greenspan reaffirmed the Fed's stance that it would be patient in considering possible increases in short-term interest rates, which now are at a 45-year low of 1 percent. The comment pleased Wall Street.

Still, he said low interest rates "will not be compatible indefinitely" with the Fed's primary job of fighting inflation. Some private economists believe the Fed could start nudging up rates this year. Others predict rates will not change until 2005.

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Fed Chairman Warns of Budget Deficit

[rapier]

1. notes

This lecture was just pro forma BS to fill time. The congress doesn't need a lecture from the Fed chaiman on fiscal policy since fiscal policy isn't in his job description. Of course a central banker is going to say balance the books. It's oh so easy lecturing on something that is so textbook and so TOTALLY out of his control.

He didn't mention what is under his control to a large extent. The credit system which has run amok. Eventually Greenspan will supplant John Law as the worst central banker of all time. While Law was at heart a con man it's possible to argue that he didn't really know what he was doing. I suppose it's possible Greenspan doesn't know what he is doing either which might be the best defense he will have in the futurer but it's a damn poor one. It's 300 years since Law and one would think Al might have learned a thing or two about history.

After all Law was the first central banker, so the ignorance defense carries some weight. Greenspan has no excuse for ingorance. It's probably better that he and his future defenders don't plead ignorance. Ego, hubris and all manner of human folly like greeed and the will for power will better explain what he has wrought so they might as well just own up to it.

I will grant that since he and the Treasury have to peddle $50 billion in new paper this week to raise $29 billion in new money to keep the government running is probably weighing on his mind a bit.

2. Read comments on my website about Greenspan's testimony

I mention Greenspan. There is a lot of background info.

I am thinking of putting together a petition to oust greenie and a few shrub appointees.

[rapier]

3. notes

Oust Greenspan, the demigod, fat chance. I would not matter at this point anyway. The Fed long ago reached the point of no return on fostering the credit bubble. Credit must continue to grow, inflate, or the system will lock up.