Bernankeynes

From Reuters:

“WASHINGTON, Feb 3 (Reuters) – Federal Reserve Chairman Ben Bernanke on Thursday issued a stern warning to Republican lawmakers that delays in raising the United States’ $14.3 trillion debt limit could have “catastrophic” consequences.

“Beyond a certain point … the United States would be forced into a position of defaulting on its debt. And the implications of that on our financial system, our fiscal policy and our economy would be catastrophic,” he told the National Press Club.”

Two quick points:

1. Bernanke is admitting here to the running of a giant Ponzi scheme, joining Obama aids who have done the same.  Not only a giant Ponzi scheme, but the biggest Ponzi scheme in all of human history.  Admitting that you have to go into more debt to stay solvent is so blatantly honest about the dire state of US finances that it basically passes under the radar and gets barely a reaction from the mind-numbed, MOPEd-out investment fraternity.
2. Why does bumping into the debt ceiling have to mean default unless you are an uber-Keynesian and you cannot think of any other way to economic salvation other than spend, spend, spend?  The answer, as Bob Murphy pointed out recently, is that it doesn’t have to mean default.  It only means default if you want to keep running the Ponzi.  But what about, shock-horror, PAYING DOWN THE DEBT?  The US should run $1.5 trillion surpluses and pay down their national debt in a decade.  End of debt ceiling debate, end of debt panic, end of Ponzi.

But if you’re Bernankeynes, that’s just silly talk.