EconomicCrisis.US

The U.S. government must take action now to prevent a rising public debt from sparking the next economic crisis, Federal Reserve Bank of Kansas City President Thomas Hoenig said Tuesday.

In a prepared speech entitled “Knocking On The Central Bank’s Door,” Hoenig warned that the U.S. central bank may come under political pressure to finance the rising debt, a move that could bring higher inflation.

“Fiscal policy is on an unsustainable course. The U.S. government must make adjustments in its spending and tax programs. It is that simple,” Hoenig said.
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Just over one year ago, President Barack Obama swept into office with the collective hopes of a nation shaken by a growing economic crisis and starved for change. With large Democratic majorities in Congress, it seemed that nothing stood in the way of a new era in American politics dominated by an energized Democratic Party. But congressional Democrats have bickered, and efforts at bipartisanship with Republicans have been rebuffed. At first glance, it may appear that the Obama presidency is somewhat adrift and that Washington is no different than before President Obama took office.
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US President Barack Obama faced a delicate balancing act in presenting his budget for next year: Stimulating the economy without bankrupting the government.

The dilemma has only worsened after a year in which the Obama administration spent unprecedented amounts of public money to wrest the world’s largest economy from its deepest economic crisis since the Great Depression of the 1930s.

Government spending helped return the US economy to growth in the second half of 2009, but that recovery has yet to translate into new jobs – a problem facing many wealthy countries around the world as they emerge from the global recession.
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U.S. Treasury Secretary Timothy Geithner warned a congressional committee Wednesday that the U.S. economic crisis is not over, and defended the bailout of insurance giant AIG, arguing that not doing anything would have amplified the scale of the financial crisis.

Testifying before the House Oversight Committee on the government’s rescue of AIG, Geithner described the decision by Treasury and the Federal Reserve to step in as “exceptionally difficult and enormously consequential.”
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