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I missed something from the public meeting Jerome Powell, Chairman of the Board of Governors of the Federal Reserve System, held at the New York Economics Club on Thursday, October 19, 2023.
Megan Cassella writes for Barron’s and quotes Mr. Powell:
“The overall level of the U.S.’s debt isn’t a problem in itself….”
However, the fiscal path we are on…that is the problem.
Mr. Powell “suggested that rapidly rising debt levels could become a problem moving forward.”
“The path we’re on is unsustainable, and we’ll have to get off that path sooner rather than later,” Powell said.
And now, even more funds are being requested by the President for the disturbances taking place in Ukraine and the Middle East.
I am not questioning the potential use of the funds, I am just pointing to the fact that when you are already so “borrowed up,” anything new coming up, no matter how good the cause might be, the budgetary problems raise flags about how the new needs will be financed…and financial problems are posed for the future.
There are graphs all over the place now, showing what the future deficits of the U.S. government will be over the next five years…over the next ten years.
The pictures are not very pretty.
But, now we have the Chairman of the Board of Governors of the Federal Reserve System being publicly quoted that the U.S. fiscal path is ‘unsustainable.’
What will our bondholders think?
What will the credit agencies think?
What will our opponents think?
We knew that the fiscal problem was there.
I have written about the fiscal problem very often.
But, now…
Federal Reserve Chairman, Jerome Powell, says our fiscal path is unsustainable!!!
Having this statement go public paints a whole new picture.
Up to this point, if Mr. Powell believed that the fiscal path we were on was unsustainable, he kept this knowledge pretty quiet.
Mr. Powell has not been one to take other parts of the government to task for things he did not agree with.
Mr. Powell has always seemed to be a pretty staunch “team player.”
He may not speak out much more about his position on the “fiscal path.”
But, now, more people will know about his feelings. More people will ask him about his stance on the “fiscal path.”
Mr. Powell will have more to be defensive about.
But, what Mr. Powell said…needed saying!!!
The U.S. fiscal path is unstainable!!!
So what are we going to do about it?
The concern is now “out in the air.”
Let’s talk about it.
Let’s do something about it.
If the U.S. fiscal path is unsustainable then investors should be talking about the issue…questioning policymakers…and, raising “a hell of a lot of noise.”
This is not something you hear about and then keep your mouth shut and then sit on your hands.
The U.S. fiscal path is unsustainable.
Let’s do something about it.
Oh, one other point attributed to Mr. Powell in the interview has to do with the debt situation.
Mr. Powell noted in his interview “that while the outlook is worrisome, the size of the U.S. debt isn’t something that affects whether the Fed will raise rates in the next six months.”
Whew! Boy, am I glad to know that!