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After pushing for fiscal aid late last year while also acknowledging the low levels of inflation it looked like Ben Bernanke was beginning to understand our monetary system.  But, one has to wonder given today’s commentary.  Is the supposedly independent Fed now back to its old fear mongering ways after they helped urge Congress to pass a tax cut for the wealthy?  Is Bernanke back to being the good old monetarist that we know he is?  Is he back to playing out of the Alan Greenspan playbook?  Based on today’s commentary (which acknowledges low inflation and then goes into a fear mongering diatribe about the dangers of the deficit, bond vigilantes, etc) it looks like Ben Bernanke’s comments late last year were either disingenuous or the man has suffered some sort of short-term memory loss (via the Fed):

“By definition, the unsustainable trajectories of deficits and debt that the CBO outlines cannot actually happen, because creditors would never be willing to lend to a government with debt, relative to national income, that is rising without limit. The economist Herbert Stein succinctly described this type of situation: “If something cannot go on forever, it will stop.” One way or the other, fiscal adjustments sufficient to stabilize the federal budget must occur at some point. The question is whether these adjustments will take place through a careful and deliberative process that weighs priorities and gives people adequate time to adjust to changes in government programs or tax policies, or whether the needed fiscal adjustments will be a rapid and painful response to a looming or actual fiscal crisis. Acting now to develop a credible program to reduce future deficits would not only enhance economic growth and stability in the long run, but could also yield substantial near-term benefits in terms of lower long-term interest rates and increased consumer and business confidence. Plans recently put forward by the President’s National Commission on Fiscal Responsibility and Reform and other prominent groups provide useful starting points for a much-needed national conversation. Although these proposals differ on many details, they demonstrate that realistic solutions to our fiscal problems are available.”

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