Just one week after James Bullard of the St. Louis branch of the Federal Reserve Bank released a paper declaring that “the U.S. is closer to a Japanese-style outcome today than at any time in recent history” (meaning that the United States will likely have decades of economic stagnation, which Bullard blames on "deflation"), the news media has taken up a chorus against the bogeyman of “deflation” to explain the need for further social spending by the government and more debasement of the U.S. dollar (causing consumer prices to rise through inflation).
Item: Speaking in Canada where he was attending the Group of 20 summit, “President Barack Obama said on Sunday he would follow through on a pledge to rein in soaring U.S. budget deficits and said that would involve presenting Americans with ‘some very difficult choices’ next year,” reported Reuters for June 27. The President, continued the wire service, “has said the deficits are a legacy of the Bush administration.”
The non-partisan Congressional Budget Office released its most dire warning yet of a looming U.S. debt crisis, openly comparing the U.S. budget situation to the Greek, Irish, and Argentinian debt crises and calling for a 20 percent cut in the size of the federal government. The July 27 report, “Federal Debt and the Risk of a Fiscal Crisis,” comes just days after the Obama administration revised upward its deficit projections for fiscal 2010-11 to a two-year total of $2.89 trillion. The CBO had labeled the federal spending path “unsustainable” in a June report.
Federal Reserve boss Ben Bernanke told Congress this week that despite not having any imminent plans to further “support” the economy, the central bank was “considering all options” to fight unemployment and could “step into new areas” because the alleged recovery remains “unusually uncertain.”