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And in breaking news, Ben Bernanke states that gravitiy does not exist.Strikingly, Mr. Bernanke acknowledged that the traditional trade-off between inflation and employment had become all but obsolete
http://www.nytimes.com/2010/08/28/bu...ed.html?emc=na
Fed Signals Stepped-Up Efforts to Spur Economy
By SEWELL CHAN
Published: August 27, 2010
JACKSON HOLE, Wyo. — The Federal Reserve chairman, Ben S. Bernanke, said Friday that the Fed was determined to prevent the economy from slipping into a cycle of falling prices, even as he emphasized that he believed growth would continue in the second half of the year, “albeit at a relatively modest pace.”
Ben S. Bernanke, the Federal Reserve chairman, and Donald L. Kohn, governor of the Federal Reserve Bank of Dallas, at the Jackson Lake Lodge at the start of the annual Federal Reserve conference, in Jackson, Wyo., on Friday.
To help sustain the economy, Mr. Bernanke said that the central bank was ready to resume its large purchases of longer-term debts if the economy worsens, a move that would add to the Fed’s already substantial holdings.
“We have come a long way, but there is still some way to travel,” Mr. Bernanke said.
“I believe that additional purchases of longer-term securities, should the F.O.M.C. choose to take them, would be effective in further easing financial conditions,” Mr. Bernanke wrote in his prepared remarks for a Fed policy symposium here. He was referring to the Federal Open Market Committee, the panel that sets interest rates, which Mr. Bernanke leads; some members have expressed unease about the Fed’s pursuing any further monetary accommodation.
While Mr. Bernanke emphasized that deflation was “not a significant risk for the United States at this time,” he said “the F.O.M.C. will strongly resist deviations from price stability in the downward direction.”
It was his most robust statement to date that the Fed would do its part to avoid a Japanese-style deflation from taking hold.
Mr. Bernanke emphasized that the economy’s recent weakness did not alter his view that growth would likely continue in the second half of this year, “albeit at a relatively modest pace.”
And he said the “preconditions for a pickup of growth in 2011 appear to remain in place,” as banks increase lending, worries over the European sovereign debt-crisis abate and consumers increase their savings.
“Stronger household finances, rising incomes, and some easing of credit conditions will provide the basis for more-rapid growth in household spending next year,” Mr. Bernanke said.
Indeed, the new report finding that the gross domestic product grew 1.6 percent in the second quarter nearly seemed to draw a collective sigh of relief from Mr. Bernanke and others gathered here — including the head of the European Central Bank, top officials from the International Monetary Fund and the World Bank, and most of the Fed’s top leaders.
The figure, which was revised down from 2.4 percent, came in higher than estimates by government and market economists.
In his 19-page speech, Mr. Bernanke outlined his views of the economy and explained the Fed’s recent action to prevent monetary policy from tightening by reinvesting the proceeds from mortgage bonds in longer-term Treasury securities.
Strikingly, Mr. Bernanke acknowledged that the traditional trade-off between inflation and employment had become all but obsolete, at least for now.
“Consistent with our mandate, the Federal Reserve is committed to promoting growth in employment and reducing resource slack more generally,” Mr. Bernanke said. “Because a significant further weakening in the economic outlook would likely be associated with further disinflation, in the current environment there is little or no potential conflict between the goals of supporting growth and employment and of maintaining price stability.”
Mr. Bernanke outlined in detail four approaches the Fed might use to further prop up the economy and ward off the threat of deflation.
First, he said the Fed’s purchases of longer-term securities had helped bring down long-term interest rates and lower the cost of borrowing, contribution to the economic stabilization and recovery that began in the spring of 2009.
However, he said such purchases seemed to be most effective in time of financial stress. It an oblique acknowledgment that the Fed might have to purchase trillions of dollars’ worth of additional assets if it decides that additional quan ative easing — the strategy of buying financial assets to put downward pressure on long-term interest rates — is needed.
Second, Mr. Bernanke opened the door to lowering inflation expectations beyond its current stances that “exceptionally low”
short-term rates would be warranted for “an extended period.” In Canada, the central bank committed to keeping a low policy rate until a specific time; in Japan, the central bank promised to keep low rates until consumer prices stabilized or rose. Mr. Bernanke said that in the United States, it might be “difficult to convey the committee’s policy intentions with sufficient precision and conditionality.”
Third, the Fed could lower the rate it pays on excess reserves — the $1 trillion in reserves that banks have been keeping at the Fed. But Mr. Bernanke said that cutting the rate even to zero would be unlikely to lower the federal funds rate — the benchmark short-term rate — by more than 0.10 to 0.15 percentage points. And doing so risked making short-term money markets “much less liquid.”
Fourth, Mr. Bernanke discussed a controversial proposal, advanced by some economist, for the Fed to set a medium-term inflation target “above levels consistent with price stability.” But he dismissed that strategy as “inappropriate for the United States in current cir stances.” Inflation would likely be higher and more volatile under such a policy, he said, while inflation expectations would become less stable.
And in breaking news, Ben Bernanke states that gravitiy does not exist.Strikingly, Mr. Bernanke acknowledged that the traditional trade-off between inflation and employment had become all but obsolete
Sounds like Ben Bernanke ain't gonna be effective with his tinkering.
The really sad part is that after the Fed basically said they were going to open the cash spigots the market basically went sideways today. Always in the past when the fed has made announcements like that the markets have gone nuts.
I wouldn't call a 165 point rally 'sideways'... unless I was a contrarian.
The Fed has signalled this previously, but yeah, more QE is a very big deal. This is where the dreaded em word comes in.
Market still had 40 minutes when I posted that. It was only up 40 then. Apparently a lot of technical short covering at the close. Certainly wasn't a celebration of good news.
So, despite the dire warnings from the resident chicken-littles, we're paying less for goods, services, and energy and the wing-nuts are butt-hurt over this?
Do you think he really believes this?“Stronger household finances, rising incomes, and some easing of credit conditions will provide the basis for more-rapid growth in household spending next year,” Mr. Bernanke said.
No.
Monetization?
Ouch.
Exactly. He just flat out announced to the world we were going to monetize our debt. Any one that has been paying attention knew that was the only politically palatable option they had, but still....
Damn
I know you mean people like me when you refer to wingnuts... I don't like the term, but so be it.
I will agree that's nice to pay less for services. However, i would prefer to have local people employed rather than call centers in India. I would prefer high school kids and US citizens to work in fast food rather than illegals. i would prefer manufacturing return to here, rather than buying most goods from Asia.
When the money we pay for goods and services go to other nations, in the long run, it harms us. The prosperous now is a decadent future.
"When the money we pay for goods and services go to other nations"
How's that "free market always provides the best solution" working out for ya?
There hasn't been a free market in this country for at least 100 years.
The activist and energetic administration of TR put a decisive end to that.
And before that, we protected domestic industry with stiff tarriffs.There hasn't been a free market in this country for at least 100 years.
Why should this be poltically palatable to anyone who is aware of it? That's what I don't get. Why is it "politically palatable" at all?
Because there's no recorded vote, but only the work of the shadow government behind the scenes? How comforting.
First we pawn our future, then we pawn our money. Alarming sequence.
What are the Repugs' plans to Get America Back to Work after they make gains in November?
subpoena Magic Negro's kids?
impeach Magic Negro?
Last edited by boutons_deux; 08-29-2010 at 08:46 AM.
It's all about the partisan ping pong, eh?
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