A reader put me onto a speech by Fed Governor Richard Fisher to the Commonwealth Club of California last week. In it Fisher sounds similar alarms regarding the dangers of runaway entitlement spending that I discussed in my post two days ago….
I see a frightful storm brewing in the form of untethered government debt. I choose the words—“frightful storm”—deliberately to avoid hyperbole. Unless we take steps to deal with it, the long-term fiscal situation of the federal government will be unimaginably more devastating to our economic prosperity than the subprime debacle and the recent debauching of credit markets that we are now working so hard to correct….Were I not a taciturn central banker, I would say the mathematics of the long-term outlook for entitlements, left unchanged, is nothing short of catastrophic.
In my previous post, I discussed what happened to Argentina when it couldn’t get government spending under control. In short, letting the problem go unsolved will lead to economic hardship like Americans haven’t seen in 80 years.
Fisher really gets colorful when he discusses potential solutions. They are totally draconian of course, fitting the scope of the problem….