We are much closer to total destruction than you think!

Did that headline catch your attention?

They aren't my words. That was how CNBC summarized someone who has far more intimate knowledge of the financial system than any blogger.

But we'll come back to that.

First off let's focus on interest rates here at home.

As you know, Canadian banks hiked interest rates this week. On the heels of those rate hikes comes Finance Minister Jim Flaherty with a warning that there are even more rate hikes coming.

• "The recent increase by a couple of the banks is exactly what we expected. And more increases should be coming. We're likely to see higher interest rates as we go forward because interest rates are still very low."

Almost makes quote of the day: "Interest rates are still very low."

That's 'very' low as in, rates are going to go way higher.

The big news story though was occurring south of the border.

As I have said over and over again, we still do not understand - nor do we appreciate - the full depth and breadth of the financial earthquate that hit us in September of 2008.

Yesterday US Federal Reserve Chairman reinforced that point in testimony before the US Congress.

And for all you out there who think the crisis is over and has past, Bernanke's comments are stunning.

Warning that America's fiscal health has deteriorated appreciably since the onset of the financial crisis and the recession, Bernanke told Congress that the US is much closer to total destruction than you think.

CNBC reported the story here.

Said Bernanke:

• "The unsustainable trajectories of deficits and debt that the Congressional Budget Office outlines cannot actually happen, because creditors would never be willing to lend to a government with debt, relative to national income, that is rising without limit. One way or the other, fiscal adjustments sufficient to stabilize the federal budget must occur at some point. The question is whether these adjustments will take place through a careful and deliberative process that weighs priorities and gives people adequate time to adjust to changes in government programs or tax policies, or whether the needed fiscal adjustments will come as a rapid and painful response to a looming or actual fiscal crisis."

Bernanke is telling Congress what Greenspan was telling us last year.

At some point the Bond market is going to force the issue on America and when it happens, the US Federal Reserve won't be able to stop it.

So for all of you who continue to believe that the government will never let interest rates go up like they did in the 1970s, not only are you ignoring the blogosphere... now it's Flaherty and Bernanke telling you what's coming.

Still not convinced?

==================

Email: village_whisperer@live.ca

Click 'comments' below to contribute to this post.

Please read disclaimer at bottom of blog.