Bernanke warns on deficits as Treasury rates rise

"Maintaining the confidence of the financial markets requires that we, as a nation, begin planning now for the restoration of fiscal balance," Bernanke said in testimony prepared for delivery to the House of Representatives' Budget Committee.

"Unless we demonstrate a strong commitment to fiscal sustainability in the longer term, we will have neither financial stability nor healthy economic growth," he said.

Add Bernanke to the list of people who don't understand our monetary system.

This is truly amazing when you think about it!

Rather than expressing concern as to whether or not the nation is fully utilizing its resources and capital (both physical capital and human capital) to maximize wealth and prosperity (basic microeconomics here, folks!), Bernanke gets all wrapped up in the nominal level of debt.

There is no mention of the fact that for every liability (debt) there is an asset (credit) and for every borrower there is a saver. That's only an accounting principle that has been in practice for 500 years!

Nor is there any understanding that most credit is created in the private sector to facilitate the consumption of goods and services--the very thing that defines the economy--and if the growth in credit is slower than the overall accumulation of the real assets that we need to live, then by definition we have rising prosperity. We are getting rich!

To the extent that gov't debt both adds to private sector savings (by definition, again!) and fosters a trend toward the full utilization of the nation's capital, but not beyond, then there is absolutely nothing to worry about. In fact, it is something to cheer.

We're dead with the likes of Bernanke's stinkin' thinkin'.