"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...
..."We're not going to monetize the debt," Mr. Bernanke declared flatly, stressing that Congress needs to start making plans to bring down the deficit to avoid such a dangerous dilemma for the Fed."
Washington Times
If this is the truth, if the Fed refuses to inject any more money into the system, we've reached the end game. Congress will either have to cut spending across the board, including social programs like Medicare and Social Security or interest rates will have to go up to attract investors to our bonds. That still wouldn't attract enough money to feed this beast. As countries like Greece begin to fold money should start flowing our way as we'll be seen as the last safe place to put it. This will help, for a short while.
The reality of the situation is that the line of credit is being closed. I've thought that we had two possible ways out of the mess we're in; hyper-inflate or collapse ourselves. It looks as though we may be choosing the latter. Good. This may give us more control as we bring it down.
What this means though, is breathtaking. The American people are going to have to live within their means, not just now but into the future. No more unfunded liabilities (Social Security, Medicare) and no more creative bookkeeping. We either must accept fiscal sanity or we will cease to exist. We will no longer be an empire and will return to something closer to what our Founders intended this country to be.
Our standard of living will fall. We will have to rely on ourselves, our families and our social networks. The days of giant government are drawing to a close and along with it the nanny state. If the government does shrink to survive, this is going to be tough.
But the important thing is that we will survive. And we'll come out stronger on the other end. America has been through tough times before and we can do it again. We have the resources we need to survive within our borders. We have the political system that works, if we follow the Constitution. Most importantly, we have the people. We may whine and complain but in the end I'll take a dozen Americans over a hundred of anybody else when the going gets tough.
So let's hope that we are making the right decision and bringing this thing down on our own terms. I don't know if the politicians have the stomach for it and I'm sure that most people won't even see it coming. So I hope that if this is the plan that maybe somebody will speak to the people and explain it. We all need to understand and accept it; get on board and get to work. This will take more than a village; it will take a nation.
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