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Subscribe to RSSWASHINGTON — Federal Reserve Chairman Ben Bernanke says a key lesson learned from the 2008 financial crisis is that central banks must have a dual goal of controlling inflation while supporting the banking system.
Bernanke said Tuesday during a speech in Boston that the steps the Fed took during the crisis proved to be successful. The Fed lowered short-term interest rates to record lows and expanded its portfolio of Treasury and mortgage-backed securities to push long-term rates lower.
The Fed has been criticized by those who say keeping rates too low for too long could fuel higher inflation later.
In September, the Fed voted to shift $400 billion of its investments to try to lower long-term interest rates. That followed the Fed's announcement in August that it planned to keep short-term rates at record lows until at least mid-2013, assuming the economy remains weak.
Both steps were approved on 7-3 votes. That represented the highest level of dissent at the Fed in nearly 20 years.
Earlier this month, Bernanke told members of Congress that the economy "is close to faltering." He assured lawmakers that the central bank was prepared to take further steps to try to bolster economic growth.
Fed policymakers meet next on Nov. 1-2. Many economists expect the central bank to hold off on further action, allowing more time for the previously adopted steps to have an impact.
Minutes of the Sept. 20-21 meeting reflected the policymakers' uncertainty over why the economy is struggling to grow and create jobs more than two years after the recession has ended.
Some members said they favored taking bolder action to boost growth because the unemployment rate has been stuck at about 9 percent, according to minutes from the September meeting. But others have argued that the central bank has done all it can and that further action could increase the risk of inflation.
The three regional bank presidents who have oppose further action have argued any further moves by the central bank run the risk of making inflation worse when the economy does rebound.
In September, employers added 103,000 net jobs. While that was enough to ease recession fears, it's well below what's needed to lower the unemployment rate, which stayed at 9.1 percent for the third straight month. It takes about 125,000 jobs a month just to keep up with population growth.
Without more jobs and higher pay increases, consumers are likely to keep spending cautiously. Many have already cut back on spending in the face of steeper food and gas prices. Consumer spending accounts for 70 percent of economic activity.
Fed Chairman Ben Bernanke speaks to the Boston Fed Economic Conference.
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Excuse me; Bernanke, we're not having a 'financial clinic' here; your organization is charged with KNOWING what to do in these cases; not reporting to us you 'learned a lesson'. Bully for you. The claim by Bernanke is pure political cover and propaganda.
At last music has stopped. We ran out of borrowers. Our money supply is what we borrowed, it is X. But we promised to pay it back with interest: X+I. The money to pay the debt does not exist! Now Bernanke wants to print money to make up the difference. But there is a gotcha: If creditors think Bernanke is going print money, they would rather wait to lend at higher rates! That reduces the credit supply which is deflationary! FED has a catch 22 now. It is hard to turn the boat around because:
1. FED makes credit available
2. Banks do not want to lend because they don't think they will get their money back.
3. Borrowers do not want to borrow because they don't think they can pay it back.
Deflationary crash is coming. Buckle up. Great Depression is going to pale compared to what we are facing!
www.kondratieffwavecycle.com/economy/deflationary-crash/
you make no sense. maybe an econ 101 class is in order, but i doubt you could comprehend it.
Summersk I can't but you have changed my mind after this last year. It is deflation not inflation we will be having. You are correct! If government wasn't inflating the debt, we would be decreasing the total money supply.
We have $50 trillion in debt in this country. Bernanke has learned nothing!
How can we have deflation when we can just print money? If deflation starts the Federal Reserve will just buy a trillion dollars of US Treasuries. A country cannot have deflation when they can print money. Once the dollar is not the world currency other countries may not accept the US dollar but we will not have deflation.
money isnt real folks...it's merely a tool
if money is a tool to measure work/effort/output...then so long as humans exist, and humans have work to do...money should exist, and be printed to meet the work executed.
Otherwise, lets go back to the barter system...
anyone wanna trade me their car for 2 goats and a mule?
Well, well gran poste, since you apparently are an econ 101 grad...... instead of bad mouthing summersk with your snarky insults, why don't you enlighten the rest of us as to how things really are?
Hey can anyone answer this question for me? Since the fed has the power to instruct the US treasury to print what appears to be unlimited amts for bank bailouts {17 trillion} why was ''TARP" even necessary?
Also it appears to me that our problem{USA} appears to be globalization i;e nafta,gatt wto etc etc not money supply. We must produce tangible assets such as raw materials that have value such as oil,coal,steel etc etc as well as finished consumer products this in my opinion is the only thing that produces real wealth,not printing money that is only an exchange mechanism or tool. My opinion is that we must abrogate or renegotiate all these trade deals and re institute protective trade tariffs that will result in the return of all the factories that have fled to china,Vietnam,India and other third world countries to take advantage of near slave labor salaries. Let's not forget that during the 80's the USA imposed import quotas on foreign automakers and the result is well known by those Americans now working at Honda,Nissan and other plants now producing fine autos in the USA.
What they learned is they can do as they please. They can pay themselves millions and millions. They can generate huge profits that they can take advantage through stock options. They can nickel and dime you with their fees on fees. They can lend your money irresponsibly and get the fees. Then unload the risk on the government meaning the US taxpayer. After doing all that they can extort the politicans they own for even more of our money. They learned one political party wants to remove all common sense regulation and oversight. The same tried and true methods that got us out of the 1930s speculation and depression. The same methods that created the greatest people in the world--- the American Middle Class. Welcome to the new serfdom.
Why would any business man decide to spend now. There is no consumer demand and there is no incentive for the banks to lend. Business is hoarding cash because banks will not lend when they can make more money gambling in the securities markets.
As to the FED keeping the interest rates low, WTF, consumers are not spending because they have no extra cash because as the article pointed out:
If there are steeper prices, at least as I remember economics 101, that's inflation.
The FED should begin raising rates NOW, so that the system gets used to having interest income (for consumers) be a real item again. Also, the goverment MUST count food and gas prices in its COLA calculations, since that is 50% of what senior citizens spend their social security on, FOOD, GAS, Rent and medicine.
Yeah, PeAcE LoVeR-2838047, that'll work. Check out the Smoot-Hawley Tariff Act of 1930, which many believe exacerbated the Great Depression significantly and kept us in the Depression until 1941.
Go figure. They haven't been able to touch OWS protests so today you see all kinds of articles in the media about how the banks aren't doing as good as they have been saying and articles like this one to try and sway public opinion, etc etc. Typical media manipulation.
Mike Kelley so based on our consistent huge trade deficits you feel that free trade is working out for American workers? Do you agree that auto import quotas have resulted in thousands of Americans working in american based foreign auto plants?
He assured lawmakers that the central bank was prepared to take further steps to try to bolster economic growth.
=====================
Uncle Ben is an a s s! He doesn't have any morebullets to fire.
But he does have a one and zero on his keyboad to fire.
i think your`re half right,he has no more bullets.
He reaffirmed my beliefs that the banks and fed reserve can steal TRILLIONS from tax payers quite easily.
That was what I learned.
Funny. Was it not Bernanke that lobbied for less Government control,
less restrictions and helped push through the bailout from taxpayers? Now, the
Central Banks learned a lesson? Might I suggest the lesson learned here is how
to take over governments, place millions out of work and be reappointed to your
job; all the while pocketing millions for yourself and your friends, at
taxpayer and government expense. Yes, there's a lesson learned, but I don't
think it was by the Central Banks.
And what did Ben Burn-Bankey LEARN? NOTHING! Same Drool, Same Drivel. The puppet should go back to his masters and ask for a new set of strings.
Bernanke should be fired along with Geithner. Then they should bring criminal charges against both of them and end the Fed. In the mean time we need to get the money out of politics so we can get our bought congress to work for us instead of the corporations. Check out www.getmoneyout.com .
What lesson? That the banksters can hold the Amercian economy hostage, and Congress will say how much do you want the check for?
Ha Ha Ha Ha! Hee hee hee hee! Learned a lesson?!?! My Aunt Fanny! Whew! Needed a good laugh. Thanks Ben.
Let me guess high unemployment
about 40% of the working population with damaged credit
banks tightening credit standards
people scared that they will be the next one to lose their job
illegal aliens taking jobs form Americans
I just can not understand why we as a country have not recovered from the recessions.
"I just can not understand why we as a country have not recovered from the recessions."
Consumers are scared. The effective UE rate (actual UE + 99ers who have given up looking + under-employed) is floating around 18%. That is 1 in 6 people. If you aren't earning, you aren't spending. If the 70% of GDP aren't spending, GDP isn't growing. It isn't rocket science.
frankly, credit cards shouldnt exist. our economy shouldnt be based on how much we can get people mired into debt. eventually (like now) you end up with people paying too high a percentage of their income just on their min monthly payments, not getting out of debt, and therefore unable to spend any of that money in the actual economy.
Tightening credit lending is a good thing.
That said, the other major issue is the cost of living:
After paying my mortgage, credit debt, utilities and gas/food...i've got nothing left to spend in the economy. Maybe once im out of debt, i'll be able to participate at a healthy level again...but until then, i'm only buying NEEDS not WANTS.
*edited to add...perhaps they are clueless, because they are financially stable...and their large incomes put them in a position of not understanding that avg american household is facing. When your income is 300K +...gas and groceries arent breaking your bank. When your income is 20K+...you're basically making money to get yourself to work, and keep a roof over your head...nothing much else.
These people need a dose of reality.
I agree credit cards are the devil and the loan companies are the devils advocate with high interest loans. But when 70% of the US economy is based on the working class dismal times like now is a sure thing.
The Fed and central banks committed the largest robbery in the history of man.
.
Bernanke please resign and turn yourself in.
My, what short memory there appears to be in the comments. If it were not for the Federal Reserve flooding the banking system with cash, every one of you would be out of a job. After the Lehman BK, the banking system froze solid. The challenge Bernanke is facing is how do you get consumers to start spending, since that accounts for 70+% of GDP growth. At the moment, he doesn't have a partner in Congress that can hold up its end on the fiscal policy side. Congress can enact fiscal policy that doesn't add to the credit card balance - it choses to just say No. The Nos are the real economic terrorists.
My guess is that Bernanke is one of the most frustrated people on the planet. He did his job but cannot get Congress and Obama to do their's. The Nos you talk about come from both political parties who will not do anything to upset their special interest groups.
Folks need a job to feel better about consumer spending. Just saying.
Yes, the issue is short memories. Or maybe those who are paying remember all too well. And don't consider these people our heroes. We didn't crash the system, but we pay the price. Flooding the system with cash is the reason for these problems. Greenspan, then Bernanke, prostituting the money supply for years brought us to this point. But Bernanke saved us?
So our hero says "the economy "is close to faltering."" Inflation is an issue? The inflation measure that doesn't include 2 of the most critical spending factors? Learned a lesson? Don't see anything changing. I could go on.
Dear BB,
It is not just short memories; it's just poor ignorance coupled with arrogance. The majority of these folks have trouble balancing their checkbooks, yet they think they understand economics better than Bernanke. They also fail to get a point clearly laid out in the report, which is that the Fed is not just the Chairman. He may be influential, but he is one of ten votes they need to enact policies.
Excuse me here. Bernanke helped to shove through legislation
that prohibits legal recourse thus protecting himself and bankers prior to the
bailout. There is also legislation that allows the same people that ruined the
financial companies to keep 100% of their earnings, when they enter government employment. They pay no taxes on earnings. If you want to know who diced the economy, just look at who is in the FED and leading the Central Banks now.
I believethat “pay to play” politics from years gone by, has changed into “purchase your government” by the bankers. Therefore, the “bailout” saved only the jobs of those “privileged” few that were allowed to make the move into the FED and other government rolls; while it provided trillions in payments that had no backing –just to keep a bottom line on numbers that the banks control.
I think the lesson here is how to manipulate those who should be overseeing
regulations, leading to legal greed by the investment bankers.
Personally, I'm not spending because I'm trying to prepare for my husband being out of a job. Mine seems to be fairly stable right now but his, on the other had, isn't looking that great. We're hoping it lasts another 6 months but we have to be prepared in case it doesn't. Therefore, any spare money is not going to be spent. It's going to pay off debt and into a fatter emergency fund.
Now we're on to the insults directed toward money managing skills. I didn't do any of the things that caused any financial turmoil, either as an employee or in my personal life. And I have studied and mastered far more difficult subjects than economics. Yet, as a taxpayer, I pay for bailouts not of my choosing. So, yes, since I have as a taxpayer (that old Wall St. favorite) "skin in the game" I have the right to comment.
The Fed did what it did in order to prevent a social revolution that would have made the French Revolution seem like a child's picnic. Those of us who still have a job are just holding on, while inflation and ever increasing cost of goods erodes our buying power. The revolution wasn't avoided, just simply put on a slow boil. Eventually, the pot WILL boil over.
Which branch of the Federal Reserve do you work for leavingBB?
@ My say-3120696...I don't see anyone insulting anybody's money management skills here. Your tax dollars went to something you don't agree with and so did mine. Mine went (and are STILL going) to fund a war in Iraq that was wrong from the beginning in my opinion and should never have been started. So, join the club....I'm sure we're all paying for something we don't think is necessary or a priority. That's called Democracy. Also, nobody gets everything they want in life....that's called being a grownup and learning that we're not the center of the universe.
United States 1776 had best answer, best thieves around. What slimeballs. And they want us to consume even more without even trying to stop the bloodletting. Most of us are cutting spending to the bone so don't depend on us to consume more - we do not have any MORE!!
the people burned by the meltdown will resemble the old folks who grew up during the depression in their spending habits.not a good time to start a career as a financial advisor,we can all count and don`t pay without value added.
That was exactly the same reaction I had just from reading the headline. LOL
You can always depend on Ben for a giggle. Or, if you have to listen to him speak for awhile, the best sleep aid you will ever have! :)
Earth to Bernanke - Please get your head out of your a$$!
one word BULL
You cannot spend what you do not have. If every American had a job, they could tax and spend to their heart's content because every American woudl be paying federal and state taxes and spending their hard earned money. Instead every chinese and Indian has a job but they are not spending it in our country. Washington just does not get it, without jobs there is no country.
Good ole Tom. Kind of a smart guy. :)
Dear Jwright,
Unfortunately, we tend to freeze the founders as we think they were in 1776. These were complex people, who didn't agree on everything and whose thinking evolved over time. Early on, Jefferson was an opponent of Central Banks and an advocate of keeping the new nation as an agrarian economy. [Makes sense if you're an aristocratic slave-holding plantation owner.] Later, especially after he became president, he changed his position considerably and supported the Central Bank concept. The founders who are the most responsible for the country we have become, Washington and Hamilton were both proponents (and architects) of the Central Bank.
Did Jefferson and Hamilton get along? Thought they disliked each other? Just asking, not making a political comment. Just trying to remember my history.
While I agree that people change over time I chose to post that comment because of it's relevance. It doesn't matter who said it or for what reason, the fact is that it is relevant and I happen to believe that banking institutions are ever whittling away at our liberties, more than any army.
Nope, not much.
Regarding Jefferson and Hamilton.
Excuse me, until the central banks reign in the greed of the global mega banks, the central banks haven't learned squat!!! Break apart the Wells Fargos, Bank of Americas, the Chases, ect. and the world economy might improve!!! The world doesn't need over paid executives with over inflated egos!!!
Yes, but people who work for the Fed, when they are ready to change jobs, need the big banks to go work for. Better money at BoA. (Sarcasm)
What they learned is we will bail them out! They will take avantage of whatever they can to insure profits and receive bonuses at whomevers expense. So much for capitalism. Also that our, for the people government is in bed with big business for the money! Political or otherwise POWER. Our Federal government need to do a much better jobs at representing the PEOPLE! I pay your wages and your highly OVER RATED and OVER PAYED!
What they learned is they can steal, cheat and rob and the tax payers will pay for the damage. Then they can give themselves huge bonuses.
The Fed Chaiman of USA is still in process of learning. Please be patient US citizen. Give him more time to learn then he will do a good job for you. Trust me please be patient.
LOL That's as good as my funny friend Ben learning a lesson. Good Post
Dear Hunu,
I think we're supposed to be always learning, unless we decide to ignore our daily experiences or asume we know it all. That was the point Stephen Colbert made about George W. Bush - a man who thinks the same thing on Wednesday he thought on Monday... no matter what happened on Tuesday.
why isn't he in GITMO?
Central bank is not capable of learning much except what GREED is. What a Joke! Just by saying, or writing something like this shows how stupid some people can get!
Bernanke needs to close his pie hole and stop showing his stupidity.
Why isn't Bernake in jail yet? Oh, that's right. No one was indicted for anything.
What Mr. Bernanke conveniently ignores is that the credit bubble that caused the panic was a direct result of the Fed's decade long quantitative easing. Not on his watch, of course, but true nonetheless. In addition, his predecessor was adamant that markets didn't need to be regulated, which was an enabler of the bubble and one of the worst judgments in modern memory. If we're going to learn from our mistakes, the Fed should learn from all of them, not just some.
Dear god,
Please do not give more power the Fed.
End the Fed : End the Wars
Ron Paul 2012
Matt Papke
USMC
You are aware that Ron Paul wants to repeal Dodd-Frank and Sarbanes-Oxley, right? This is taking the banks and brokerage houses back to regulations before ENRON.
How's this going to make life better please?
Ron Paul wants to go back to the original constitution and its attached bill of rights, and put the country back on track to how we became a great nation.
WHAT IS WRONG WITH THAT?
Dr. Paul wants to fix the corruption, manipulation, lies, and outright disregard for our constitution. How can that hurt us?
Of course it will take time, and will be a battle against big money that is destroying us all. So if you support big money, corruption, and hate the constitution, I can clearly see how you do not like Ron Paul.
But he knows more about how money works, than the entire federal reserve.
Maybe this is why he is ranking so high in the polls, without major media attention.
Ron Pauls revolution is just beginning, and it is based on the constitution, honesty, and what is good for the USA.
If these things upset you, GOOD.
I like Ron Paul but he will never stand at the podium. First the top1% will make sure to belittle him every chance like they are doing in the media. If that doesn`t work they will find a patsy!