With uncharacteristic bluntness, Federal Reserve Chairman Ben S. Bernanke warned Congress that the United States could soon face a debt crisis like the one in Greece, and declared that the central bank will not help legislators by printing money to pay for the ballooning federal debt.
"It's not something that is 10 years away. It affects the markets currently," he told the House Financial Services Committee.
Mr. Bernanke for the first time addressed concerns that the impasse in Congress over tough spending cuts and tax increases needed to bring down deficits will eventually force the Fed to accommodate deficits by printing money and buying Treasury bonds — effectively financing the deficit on behalf of Congress and spurring inflation in the process.
Some economists at the International Monetary Fund and elsewhere have advocated this approach, suggesting running moderate inflation rates of 4 percent to 6 percent as a partial solution to the U.S. debt problem. But the move runs the risk of damaging the dollar's reputation and spawning much higher inflation that would be debilitating to the U.S. economy and living standards.
[The Washington Times]