Investors, economists and others lapped up Fed chief Ben Bernanke’s soothing words that the economy looks like it is having a “moderate recovery”, a view supported by the latest Beige Book of anecdotes to be used at the Fed meeting in a fortnight: “Overall economic activity increased somewhat … across all Federal Reserve districts except St Louis, which reported “softened” economic conditions.”

Retail sales rose 1.6%, thanks to the surge in car sales (as desperate Toyota led a price-cutting war); inflation was steady and Bernanke said the lack of any threat from inflation would enable the central bank to maintain interest rates at their current record lows for “an extended period” to support the moderate recovery to the fullest.

But while everyone was rejoicing, they skated over the chairman’s repeating of comments from a week ago that “significant restraints” remain “on the pace of the recovery, including weakness in both residential and non-residential construction and the poor fiscal condition of many state and local governments.” Nor did they listen to his comments that a “moderate” recovery won’t do much to reduce the huge pool of unemployed across America: “If the pace of recovery is moderate, as I expect, a significant amount of time will be required to restore the 8-½ million jobs that were lost during the past two years. I am particularly concerned about the fact that, in March, 44% of the unemployed had been without a job for six months or more.”

And that gloom on US unemployment was the major point in the early chapter of the IMF’s latest World Economic Outlook, which has the jobless rate in the world’s advanced economy remaining about 9% until next year.

“Persistently high unemployment will be the key policy challenge facing many advanced economies as recovery gains traction,” the IMF forecast. “For many advanced economies — where the financial crisis was centered — recovery is expected to be slow,” the IMF added.

And given what the Financial Times this week called the current the “irrational equanimity” in the markets about the economy, recovery, debt and the health of the financial system, it is understandable that Americans again ignored Bernanke’s warning on debt and deficits. There’s too much of it and the amounts are too high.

In their current euphoria, American markets believe they are in the midst of a great recovery that will solve all; Americans don’t want to be told that it will take at least the next 10 years for the debt and deficit mountains to be controlled.

Bernanke pointed out that the problems with the deficit is that the underlying problems are structural; and were there before the crunch and slump. (In fact he was facing some of the very people to caused the problem, members of the US Congress),.

“In addition to the near-term challenge of fostering improved economic performance and stronger labor markets, we as a nation face the difficult but essential task of achieving longer-term sustainability of the nation’s fiscal position … an important part of the deficit appears to be structural; that is, it is expected to remain even after economic and financial conditions have returned to normal.

“To avoid large and unsustainable budget deficits, the nation will ultimately have to choose among higher taxes, modifications to entitlement programs such as Social Security and Medicare, less spending on everything else from education to defense, or some combination of the above,” he noted.

He said that assuming that government spending grows slowly, there’s no more tax breaks or other lurks handed out, the budget deficit will still be 4%-5% of GDP by the end of the decade and the debt would be above 70% of GDP. But if there is no discipline, then the deficit will be 9% of GDP by 2020 and debt will be more than 100% of GDP.

“Addressing the country’s fiscal problems will require difficult choices, but postponing them will only make them more difficult,” Bernanke said. The warning fell on deaf ears.