The Fiscal Cliff - A Different Perspective

Dr. Ben Bernanke coined the term "Fiscal Cliff". Here is what he said about it in a November 20th speech (the entire speech can be read at: www.FederalReserve.gov )

"...Of course, we should all understand that long-term projections of ever-increasing deficits will never actually come to pass, because the willingness of lenders to continue to fund the government can only be sustained by responsible fiscal plans and actions. A credible framework to set federal fiscal policy on a stable path--for example, one on which the ratio of federal debt to GDP eventually stabilizes or declines--is thus urgently needed to ensure longer-term economic growth and stability...."

And he included the following quote:

 

As Dr. King is widely quoted to have said, "We may have all come on different ships, but we're in the same boat now."

 It is easy to forget that deficits must be funded and that this willingness to buy Treasury Bonds (at very low interest rates right now) is not without limits forced upon it by others outside of Congress. Not pretty, but a reality.