Bernanke Tells Congress to Cut Spending

Bernanke is testifying before Congress today and here’s part of what he said:

“The recent projections from the Social Security and Medicare trustees show that, in the absence of programmatic changes, Social Security and Medicare outlays will together increase from about 8-1/2 percent of GDP today to 10 percent by 2020 and 12-1/2 percent by 2030. With the ratio of debt to GDP already elevated, we will not be able to continue borrowing indefinitely to meet these demands.”

This is big news. He basically told Congress to stop spending so much money.

It will be fascinating to see how Congress and the White House respond. My read is that the Fed doesn’t want to do any more quantitative easing. Bernanke appears to be siding with the biggest investor in U.S. debt, namely China.

We’ll have to watch the U.S. dollar to gauge the reaction from Wall Street the world.

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