Yellen: $20 trillion national debt ‘should keep people awake at night’

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CNBC: With Congress wrestling over a tax reform plan that critics say would explode the government budget deficit, Federal Reserve Chair Janet Yellen said she also is concerned over the surging level of public debt.

A Senate committee passed the GOP-sponsored proposal, which would slash the corporate tax rate and lower individual income rates for many Americans.

However, the price tag of the plan is in the area of $1.5 trillion at a time when the Congressional Budget Official already is projecting a deficit of more than $1 trillion in the years ahead and with the total debt level at $20.6 trillion and rising. Of that total, $14.9 trillion is owed by the public.

“I would simply say that I am very worried about the sustainability of the U.S. debt trajectory,” Yellen said.

Opinion: Now she’s worried? Maybe that is why Bitcoin is parabolic.

A trip down memory lane:

QE1 took place in November 2008 when the Fed spent $600 billion on purchases of Mortgage-backed Securities (MBS). The spending peaked at over $2.1 trillion in June 2010 on purchases of Treasury, Mortgage, and other securities.

QE2 entered the economy only three months away from the departure of QE1. Although the Fed had found that the economy was growing, it wasn’t growing as strongly as they desired. In November 2010, the Fed started the second round with purchase of $600 billion worth of Treasury securities along with an added investment of $250-300 billion in treasuries from the profits of the previous investments.

The Fed had to fall back on QE for the third time in September 2012. QE3 was different from its predecessors because the Fed, this time, chose to have a monthly approach for purchases instead of buying it in bulk with the total budget over a period of time. The initial budget was $40 billion/month which got raised to $85 billion by December 2012.

Janet Yellen was Vice Chair to Ben Bernanke of the Federal Reserve from 2010 to 2014 and became Chairwoman in 2015.

The Fed and Barack Obama together ran America’s credit card to $19 trillion, and in case anyone believes that our new president is going to correct the problem, think again. Congress is speeding toward a budget plan that, in the name of cutting taxes, lets the government collect $1.5 trillion less revenue for the next 10 years.

I can’t help but wonder if Mrs. Yellen slept well during those years when she and her predecessor created $4.5 trillion in debt out of thin air?

2 COMMENTS

  1. You know what is really scary? Go to this website demonocrasy.info and see what a trillion dollars looks like in $100 bills stacked on a pallet 465 ft tall. Then scroll down and see what the derivative exposure is for the top 10 banks, 9 in the US – over 200 trillion!! That’s over 7 times the wealth of the world. Only God Almighty is keeping this thing floating until….

    • Thanks for responding. Derivative exposure of major banks has been a topic of several posts over the past few years (http://bptnews.org/2017/04/where-theres-smoke/) and because of low interest rates, derivative investments have grown to unimaginable numbers that by some estimates have exceeded $1.5 quadrillion or 1,500,000,000,000,000, which, if true, is up 20% from 2008.

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