Both the US budget deficit and current account deficit should be reduced, Federal Reserve nominee Ben Bernanke said today, noting that America was lucky foreigners are willing to hold so much US debt.
"I agree that budget deficits are a problem, I think it is important to continue to reduce budget deficits," Mr Bernanke, who is US President George W. Bush's pick to succeed Fed Chairman Alan Greenspan, told the Senate Banking Committee. He said he would not making recommendations on specific tax or spending proposals.
While Mr Bernanke said the current account deficit needs to be reduced over "a period of time," he declined to say whether he was concerned about the size of the gap. "Given that we have a large current account deficit ... and given that deficit needs to be financed, we are fortunate that foreigners seem quite willing to hold US Treasury debt and other financial instruments, including foreign central banks," Mr Bernanke said.
"It's like asking how it feels to be growing old: when you consider the alternative, it's better to have willingness to hold our financial assets than not."