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Bernanke Says U.S. Heading for Greece Style Debt Crisis

Interest-Rates / US Debt Feb 28, 2010 - 03:12 AM GMT

By: Washingtons_Blog

Interest-Rates

Bernanke is now joining Rosenberg, Ferguson and Faber, Edwards, Grice and many others in warning that the debt crisis rearing its head in Greece may spread to America, causing U.S. interest rates to climb.


As the Washington Times wrote yesterday:

With uncharacteristic bluntness, Federal Reserve Chairman Ben S. Bernanke warned Congress on Wednesday that the United States could soon face a debt crisis like the one in Greece, and declared that the central bank will not help legislators by printing money to pay for the ballooning federal debt.

Recent events in Europe, where Greece and other nations with large, unsustainable deficits like the United States are having increasing trouble selling their debt to investors, show that the U.S. is vulnerable to a sudden reversal of fortunes that would force taxpayers to pay higher interest rates on the debt, Mr. Bernanke said.

"It's not something that is 10 years away. It affects the markets currently," he told the House Financial Services Committee. "It is possible that bond markets will become worried about the sustainability [of yearly deficits over $1 trillion], and we may find ourselves facing higher interest rates even today."

Yes, massive debt overhangs do matter.

Contrary view: A very smart financial expert disagrees, telling me:

Higher interest rates do not equal a debt crisis.

Greece's situation is not comparable to the US. Greece's situation is comparable to that of California. It makes a big difference whether you control your currency or not.

Washington's Blog

Global Research Articles by Washington's Blog

© Copyright Washingtons Blog, Global Research, 2010

Disclaimer: The views expressed in this article are the sole responsibility of the author and do not necessarily reflect those of the Centre for Research on Globalization. The contents of this article are of sole responsibility of the author(s). The Centre for Research on Globalization will not be responsible or liable for any inaccurate or incorrect statements contained in this article.


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