Bernanke: Get rid of the debt ceiling, it has no practical value

Washington Examiner ^ | January 14, 2013 | January 14, 2013

[Sir Napsalot]

Federal Reserve Chairman Ben Bernanke criticized the debt ceiling as an unusual device that can be used to prevent the United States from paying it’s bills, as he suggested that the country would be better off if the debt limit did not exist.

“I think it would be a good thing if we didn’t have [the debt ceiling],” Bernanke told students at the University of Michigan today. “I don’t think that’s going to happen. I think it’s going to be around.” Those remarks put Bernanke in agreement with Treasury Secretary Tim Geithner, who has said that Congress should eliminate the debt ceiling.

The conversation began when Bernanke was asked if the debt ceiling had any “practical value” as a matter of fiscal policy. “No, it doesn’t really have — it’s got symbolic value, I guess, but . . . no other countries in the world have this particular institution,” he said.

“If the Congress is approving spending and it’s approving taxing, and those two things are not equal,” Bernanke continued, “the way to addres it is by having a sensible plan for spending and a sensible plan for revenue and make decisions about how big the government should be or how small it should be.”

[hummingbird]

"“No, it doesn’t really have — it’s got symbolic value, I guess,..."

So, NOW he admits it. What a lot of people already knew.

Hope Bernanke and Geithner watch out...especially for the 'under the bus' thingy.

Or is this all an Obama plan?

I trust none of them.

[rollo tomasi]

“It’s very, very important that Congress take the necessary action to raise the debt ceiling to avoid the situation where the government doesn’t pay its bills,”

yet

“debt ceiling” has “symbolic value”

Good grief, this guy is just a crony whose job is to keep the grifting/debt running smoothly/growing. The Federal government has plenty of assets to sell off that would of payed for TARP, the Treasury, and serving preexisting debt. Bernanke in the private sector and public officials who were covering for the problems they unleashed on the financial sector (Which screwed the pooch) should of not had their loses socialized. My kids and their kids should not have to deal with the mistakes that past generations have placed on them, like half-baked Keynsian policies that only deal with the here and now. Enjoy admiring your witch doctors, they sure have you spellbound.

Debt ceiling = responsibility, it should be lowered not abolished. Bernanke is drinking Keynes' Flavor-aid. Like I said, the Fed gov have trillions in assets they could sell off without raising taxes and thousands of regulatory "decrees" if eliminated that would grow the economy (Thus more receipts) to pay their bills, but your heroes in the economic world are arguing to just green light more spending/debt growth by calling for the end of this "symbolic" ceiling. I guess your groupie mentality has blinded your being able to see the end game going on; Bernanke's insistence that Congress should have the perpetual freedom to grow the debt to infinite and not be restrained by "symbolism". Bernanke's words brings orgasms to tax and spenders, yet he is brilliant or whatever undeserving glorifying adjective you used for him.

[Wyatt's Torch]

Geithner wasn't the Treasury Secretary in 2007-8. TARP was pushed by Bush and Paulson.

I never said Geithner was Sec Tres. He was head of the NY Fed and was instrumental in arranging the "marriages" of many of the banks. He worked extremely closely with Paulson and was part of the team to come up with TARP.

So was the auto bailout.

Never said I agreed with the auto bailout...

It is just more kicking the can down the road and bailing out the big banks and insurance companies. Instead of being held accountable, the taxpayer picked up the tab.

you do realize that if the government had let all the banks and insurance companies go the "Great Recession" would have been thousands of times worse right? The impact of the huge amount of derivatives would have wiped out many trillions more of wealth (of you and me not just banks) and the global economy would have completely collapsed. Credit markets would have frozen for years. It would have made the Great Depression look like a mild dip. Oh and the vast majority of TARP finds have been repaid.

The huge Porkulus bill and increased spending has led to an additional $6 trillion being added to the national debt in four years. We will pay a fearful price for this "masterful handling" of the fiscal crisis.

Again this was Obama and Congress not Bernanke and Geithner and I agree that the Porkulus bill was a disaster.

Holding interest rates artificially low is helping to debase our currency and will eventually lead to the rest of world going to a different reserve currency.

We are still in a very slow recovery so low rates is the proper mechanism. Raising rates now would choke off what little growth their is and make the fiscal situation worse. It is interesting that despite the "massive debt problem" that the "flight to safety" remains UST's...

[Wyatt's Torch]

How does the "debt ceiling = responsibility and Bernanke's insistence that Congress should have the perpetual freedom to grow the debt to infinite and not be restrained by "symbolism"" if it has always been raised by Congress and Presidents of BOTH parties?

What would have been the impact on "your kids" had the financial sector, through the wiping out of trillions of dollars of derivatives, been allowed to fail and not "bailed out by TARP which has been substantially repaid in full?

I agree with you on the "half-baked Keynsian policies' and have never said otherwise. Again, that was all Obama and Congress. If you don't believe in Keynesianism what sort of economics do you believe in and what is the proper response to a deflationary spiral? TIA.......

[rollo tomasi]

Do you want C/P games? Ok. First "your people".

<"People who are opposed to bailouts of any kind like to argue that TARP was not really necessary. Banks could have been allowed to fail and the economic fallout around the world would not have been so dramatic. This was, of course, the view taken by policy makers in 1929–31, after the Great Crash. Top people at the Federal Reserve and Treasury argued that the United States had experienced a financial mania (true), that a fall in asset prices was long overdue (quite likely, at least for stocks), and that the right approach was to stand back and — in the unforgettable words of Treasury Secretary Andrew Mellon, let the private sector "liquidate labor, liquidate stocks, liquidate the farms, liquidate real estate." The result was the Great Depression. No responsible policy maker would want to run that risk again."



http://economix.blogs.nytimes.com/2010/09/30/tarp-the-long-goodbye/

Next, what actually happened which pro-TARP, the end is near people refuse to acknowledge (PS if you use Wiki I can too)

http://en.wikipedia.org/wiki/Reconstruction_Finance_Corporation

Hoover's own TARP, "repaid" by the way, did not stop the depression, just gave FDR more of an excuse to "liquidfy" and spend, yee-haw.

Also how can the derivatives disaster be fully repayed, lol? Bankers, many going out with millions thanks to the protection of the government were sure glad, but the taxpayers got a blank return (Look at ALL the data BTW) plus all those non-Wall Street INDIVIDUAL citizens whose assets went way down, currently swimming underwater waiting for their "liquidation" to their own accounts, are never getting any of that stuff fresh off the printing press.

[RatRipper]

If it has no practical value, why go to the trouble of changing it?

The practical value of the debt limit is undermined by a Fed Chairman (Bernanke) who is perfectly willing to buy government generated debt with out limit and monetize it. If he got what he deserved, Bernanke would be hauled out and hung by a mob of hard-working Americans (not to mention their children), from whom he is stealing on a massive scale.

[cymbeline]

There’s a debt ceiling on my credit card. There was a debt ceiling on how much I could borrow to buy my house. Any lending institution will place a limit on how much a borrower can borrow.

Our debt ceiling is our country’s self-imposed credit limit. It forces our government to address the question of how much borrowing is prudent. It requires legislation to be changed. It is a braking mechanism for our expansion of debt.

Our big-spending administration is having a fit over this barrier to their spending. Obama lies when he says increasing the debt spending won’t increase spending.

We already have more than enough debt. Every available means needs to be used to avoid or at least minimize further increases.

[kabar]

I never said Geithner was Sec Tres. He was head of the NY Fed and was instrumental in arranging the "marriages" of many of the banks. He worked extremely closely with Paulson and was part of the team to come up with TARP.

So TARP was a good idea?

you do realize that if the government had let all the banks and insurance companies go the "Great Recession" would have been thousands of times worse right? The impact of the huge amount of derivatives would have wiped out many trillions more of wealth (of you and me not just banks) and the global economy would have completely collapsed. Credit markets would have frozen for years. It would have made the Great Depression look like a mild dip. Oh and the vast majority of TARP finds have been repaid.

Those were the fear tactics used to bail out those too big to fail. It helped stampede Congress into signing on to it. It is so easy to make those statements just like stomping my foot in my living room in VA keeps the elephants away. TARP After Three Years: It Made Things Worse, Not Better

TARP Inspector General: TARP was a Failure

Again this was Obama and Congress not Bernanke and Geithner and I agree that the Porkulus bill was a disaster.

Geithner supported the Porkulus bill and wanted to make it even bigger. The idea that you can separate Obama and Geithner in terms of policy is nonsense. And it was passed by a Dem-controlled Congress with almost no Rep votes. It was rammed down our throats just like Obamacare. Both Obama and Geithner claimed that Porkulus saved millions of jobs and was key to getting us out of the fiscal crisis.

We are still in a very slow recovery so low rates is the proper mechanism. Raising rates now would choke off what little growth their is and make the fiscal situation worse. It is interesting that despite the "massive debt problem" that the "flight to safety" remains UST's...

The interest rates are being held artificially low. With our huge and growing federal debt, when interest rates return to their historical norm of 4% to %5, our debt servicing costs will increase exponentially overnight.

The artificially low rates are not helping growth and they mask our serious debt problem. They are also causing the devaluation of the dollar and undermining the dollar as the world's reserve currency.

It is interesting that despite the "massive debt problem" that the "flight to safety" remains UST's...

Right now the Fed is buying 70% of our T-bills. China has decreased its holdings. The SSTF holds the greatest amount of T-bills--around $2.7 trillion. The Fed holds about $2.1 trillion. $11.4 trillion is held publicly with the foreign owned portion being around $5.4 trillion. China has actually decreased its holdings of T-bills.

You can take solace that investments in T-bills is the best options compared to all the other options, but the reality is that none of these options are good and the whole global economy will collapse like a house of cards once the dollar does its inevitable swan dive. We are headed the way of Greece.

[cableguymn]

The house shares the blame. ya, budget die in the senate.

The house keeps passing CR’s.

shut it down.

[demshateGod]

He’s right though. And while we’re at it, or rather, while Obama’s at it, “we” don’t matter anymore, I say, while Obama’s at it, he should get rid of the House, Senate, Supreme Court, and all state and local governments. If it takes all that to get rid of the BCS, it might be worth it.

[bgill]

My checkbook is full so I must have money in my account.

[rollo tomasi]

1) I get that reasoning, but currently the ceiling has been a political football with spending going through the roof. "The People" see this $16 trillion with their own assets going down and not any cuts in sight. When the debt was resonbly managable during all kinds of economic activity in the 80's, the ceiling went up 17 times (During the Reagan administration). Like I said most people were not paying attention which was a huge mistake, many are now though (Also during GWB term where many on this site were against the raise). 2) TARP was another exercise in Federal spending where the government was allowed to socialize the loses, i.e. and example of another Keynesian Fallacy of taxing/borrowing undermining the free market. I have yet seen any cut/benefit given directly to the tax payers, only more stimulous. Also, the credit scare, this guy's retort went hardly notice during the scam:

So what's special about banks? According to what I keep reading, it's that without banks, nobody can borrow, and the economy grinds to a halt.

Well, let's think about that. Banks don't lend their own money; they lend other people's (their depositors' and their stockholders'). Just because the banks disappear doesn't mean the lenders will. Borrowers will still want to borrow and lenders will still want to lend. The only question is whether they'll be able to find each other.

That's one reason I feel squeamish about the official pronouncements we've been getting. They tell us bank failures will make it hard to borrow but never that bank failures will make it hard to lend. But every borrower is paired with a lender, so it's odd to state the problem so asymmetrically. This makes me suspect that the official pronouncers have not entirely thought this thing through.

In the 1930s, a wave of bank failures did make it hard for borrowers and lenders to find each other, and the consequences were drastic. But times have changed in at least two relevant ways. First, the disaster of the 1930s was caused not just by bank failures, but by a 30% contraction of the money supply, which is something today's Fed can easily prevent. Second, as any user of match.com can tell you, the technology for finding partners has improved since then. When a firm wants to raise capital, why can't it just sell bonds over the web? Or issue new stock? Or approach one of the hedge funds that seem to be swimming in cash? Or borrow abroad?

I know, I know, the rest of the world is in crisis too. But surely in the vast global economy, it should be possible to find someone capable of introducing a lender to a borrower. (Note that I'm not talking about going to foreign lenders, though that's another option. I'm just talking about the same American borrower and American lender who would have found each other through Bear Stearns finding each other through Barclays instead.)

In other words, I'm not sure these big Wall Street banks are really necessary, and I'm not sure we'd miss them much if they were gone. Maybe there's something I'm missing, but if so, I think it should be incumbent on Messrs. Bernanke, Paulson and above all Bush to explain what it is.



http://thecurrent.theatlantic.com/archives/2008/09/not-buying-it.php

[rollo tomasi]

Sorry, stimulous = stimulus

Also apologies for the formatting, forgot a para. break between points 1 and 2.

[Sir Napsalot]

Thanks all for a good discussion.

Bernanke: “... it’s got symbolic value, I guess, ....”
===> Look, I didn’t say Bernanke was wrong.

Pretty much what we have now only got ‘symbolic value’ - Recent election is a sham, the people we elected to represent us is a sham (mostly), the three branches of our government is a sham, the TARP/Stimulus/Bailout/what-nots are a sham.

The illusion of liberty and ownership of our own property is soon to be dawn on general public. How did we get to this sorry point?

[Ohioan]

A better idea would be to get rid of Bernanke. He is doing something, the "practical" value of which is to impair the obligation of contracts--something that even the sovereign States are forbidden to do, under the Constitution.

When he monetizes each month's new debt, he undermines the real value of every dollar that people have contracted to pay. It is a moral outrage, which is a more honorable time would have been recognized as such.

William Flax

[rollo tomasi]

One more point, because of the "housing crash"/debacle which reared its ugly head, thus had mad scientist calling for TARP and other Fed gov "projects", inflation became a boogyman and the massive liquidity mad scientist have pretty much retarded savings with their rates/emphasized banks to only slowly lend.

Fun part will be when the glorious Reservist will sell assets in order to absorb up the excess reserves if (Are allowed) banks to pick up the loaning practices if this "fragile recovery" lol, love the blessings from the Treasury, Helicopter Ben's newsspeak btw, starts breaking/businesses need more "liquid" (All these new taxes/health care crap might brew a perfect storm).

These witch doctors you promote never learned anything from the late 1920's/FDRs "reign". Just more evading the Free Market, thus another round of bad theories leading to bad conclusions, leading to more spending, leading to more debt. Nail in the coffin would be, like I said, banks beginning to increase a substantial volume of loans/lending which will unleash inflation (Not sure if the current aroma of deflation right now is better, lol, take your pick).

[rollo tomasi]

Well Bernanke's symbolism is on display again.

House GOP Leaders Consider Four-Year Debt Limit Deal

http://www.rollcall.com/news/house_gop_leaders_consider_four_year_debt_limit_deal-220724-1.html

At least there are cuts involved, lol, but history proves any promised cuts are just illusions. The Republican spin machine will still emphasize those cuts when pleading with the realist.

[allendale]

Worked? All they did was debase the currency, postpone the necessary and inevitable restructuring that must occur ( including some sacred cow bankruptcies), and extended the credit card style living and faux lifestyle. Congress? Much more sympathy for Republicans who at least attempt to cut spending and understand the concept of productive capitalism. Bernacke and Geithner are simply horrible financiers of the vile Obama clown parade. They are little better than criminals.

[Varsity Flight]

“titled Bernanke: Get rid of the debt ceiling, it has no practical value,...for the United States”

No, for Washington and Fairfax.

Wyatt Torch: “banks and insurance companies”

SO CALLED “banks and insurance companies”....ANTI-Glass Steigal scam artists.

allendale: “All they did was debase the currency, postpone the necessary and inevitable restructuring that must occur..”

All they did was postpone, until figuring out schemes like Extortion-Care, and more, to pass off counterfeit collateral by Collateral Transformation, on everyones elses backs but “The Exempt Ones.”

[trebb]

Kind of like throwing the baby out with the bath water and deciding that the baby made the water dirty in the first place, so let’s just dispense with babies...