Lone voice warns of debt threat to Fed

The US must fix its growing debt problems or risk a new financial crisis, Thomas Hoenig, president of the Federal Reserve Bank of Kansas City, warned on Tuesday, adding a mounting deficit could spur inflation.

Mr Hoenig said that rising debt was infringing on the central bank’s ability to fulfil its goals of maintaining price stability and long-term economic growth. “Stunning” deficit projections were putting political pressure on the Fed to keep interest rates low, infringing on its independence at the risk of inflation, he said.

“Without pre-emptive action, the US risks its next crisis,” Mr Hoenig said in a speech at the Pew-Peterson Commission on Budget Reform.

He was the only Fed member who dissented at last month’s meeting against language indicating that interest rates should remain near zero for an “extended period”.

On Tuesday he said that the worst option for the US was a scenario where the government “knocks on the central bank’s door” and asks it to print more money. Instead, the administration must find ways to cut spending and generate revenue. He called for a “reallocation of resources” and noted that the process would be painful and politically inconvenient.

So what is the GOP prepared to do about it? I don’t think they’ll have much time to bask in the glory of Nov election results. We know Obama’s solution will be to tax us to death if he can. But is a GOP majority prepared to get entitlement spending under control (ie substantial cuts?)?

There is more they can do than cut spending on social security and medicare. They can cut functions/departments in the Federal government not provided for in the constitution. They can cut foreign aid and aid to foreigners in the country. They withdraw from the UN. They can privitize the TSA and cut back on Homeland Security excesses and global warming research and measures. They can cut back military involvement and let the EU pay for it’s own military protection.

The money they took from workers and employers for SS and health care for their old age should not be stolen from them but the programs should be phased out for those who have the time to accrue the assets to survive in their old age. The Federal government should not default on retirement assistance promise that people paid into. If the Federal government can guarentee bankster loses; they can should not default on the agreement they made with the eldery who paid into SS and medicare in good faith.

The main shift we have to accept is that we are no longer the world’s sugar daddy and protectors. We are broke. Our country is over populated.

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