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April 14, 2010 in Business, Nation/World
Bernanke confident on recovery; warns on deficit
WASHINGTON — Federal Reserve Chairman Ben Bernanke told Congress today that he has confidence the unfolding economic recovery will have staying power, although it won’t be strong enough to bring quick relief to high unemployment.
Bernanke, testifying before Congress’ Joint Economic Committee, also once again called on lawmakers and the White House to come up with a plan to whittle down record-high budget deficits.
Even though sizable deficits right now are “unavoidable” given the damage wrought by the recession, the persistence of red ink raises risks to the country’s long-term economic health, he said.
A credible plan to pare the deficit could provide the economy with benefits in the near term, including lower longer-term interest rates and increased consumer and business confidence, Bernanke told lawmakers.
“Addressing the country’s fiscal problems will require difficult choices, but postponing them will only make them more difficult,” he warned.
On the economy, Bernanke seemed slightly more optimistic that the fledgling recovery will keep on going after massive government stimulus fades later this year. Incoming economic barometers suggest that growth in demand by consumers and businesses “will be sufficient to promote a moderate economic recovery in coming quarters,” he said.
Rep. Carolyn Maloney, D-N.Y., head of the committee, welcomed the message, but said the government must remain focused on “fixing the economy, putting people back to work and helping struggling families.”
Consumers are spending again after having cut back sharply during the recession. Going forward, consumer spending should be helped by a gradual pick up in jobs, a slow recovery in household wealth from recent lows and some improvement in the ability to get loans, Bernanke said.
That assessment of consumers — whose spending accounts for 70 percent of national economic activity — also appeared more upbeat. In recent weeks, Bernanke and other Fed officials have cited a litany of headwinds facing consumers, including high unemployment, rising home foreclosures and sluggish wage growth.
Shoppers boosted retailers’ sales by a strong 1.6 percent in March, a better than expected showing, the government reported on Wednesday. That’s a promising sign that consumers will do their part to keep the recovery going.
Another government report showed that inflation remains tame. Consumer prices edged up 0.1 percent last month. Low inflation gives the Fed leeway to hold interest rates at rock-bottom levels to support the recovery. Despite a steep run-up in energy prices, inflation is under control, Bernanke said.
Fielding questions from lawmakers, Bernanke repeated the Fed’s pledge to keep interest rates at record lows for an “extended period” to aid the recovery. Rates have been at super-low levels since December 2008.
At some point when the recovery is firmly entrenched, the Fed will need to start boosting rates to prevent any inflation problems.
The soonest the Federal Reserve will begin raising short-term interest rates is the fourth quarter, according to 34 of the 44 economists polled in a new AP Economy Survey that debuted on Monday.
Businesses, meanwhile, have boosted spending on equipment and software at a solid pace and factories are benefiting from stronger demand for U.S. exports, Bernanke noted. Improved financial conditions are also helping out the economy.
However, problems still remain.
Bernanke said weakness in the housing and commercial real-estate sectors is putting “significant restraints” on the pace of the economic recovery. And, the poor fiscal conditions of many state and local governments have led to continuing cutbacks in workers, another force that will hold back the recovery, he said.
“You got some giant issues,” Sen. Sam Brownback, R-Kan., told Bernanke.
On the jobs front, Bernanke was encouraged by the 162,000 jobs added in March, the most in three years. However, the moderate pace of the economic recovery means that the 8 million-plus jobs lost by the recession won’t quickly return. Bernanke said it will take a “significant amount of time” to restore those positions. He didn’t say how long.
The unemployment rate has been stuck at 9.7 percent for three straight months, close to its highest levels since the early 1980s.
Bernanke said he is especially concerned about that 44 percent of the unemployed in March had been without a job for six months or more. “Long periods without work erode individual’s skills and hurt future employment prospects,” he said. Younger workers may be particularly hurt if the weak labor market prevents them from finding a first job or from gaining important work experience, Bernanke said.
On other topics Bernanke said:
—China should let the value of its currency rise, a move that would support U.S. exports by making them cheaper to foreign buyers.
—The Fed doesn’t see speculative bubbles forming in assets such as stocks, bonds or commodities, at this point but is closely monitoring the situation. Some worry that the Fed’s low rates will create another bubble like the one in housing that burst and threw the economy into a recession.
© Copyright 2010 Associated Press. All rights reserved. This material may not be published, broadcast, rewritten, or redistributed.
Life and debt 
liarsinnews on April 14 at 10:01 a.m.
What a frickin hypocrite Bernanke is. For gosh sakes, he helped to drown the taxpayers in red ink bankrupting our country. The crooked bankers sure think the world of him. The low life bankers should publicly thank him for their bonus checks.
chump on April 14 at 11:06 a.m.
Amazing that the press still prints stuff this guy says. His actions remind me of some old black-and-white vampire movie, hiding in the shadows and defying Congressional inquiries into transparency.
Even lame-stream-media is getting hip to the secretive means the FR uses to build greater debt.
The title of the article should, IMHO, be “Bernanke spews more conflagration with hope that the citizenry fall for it.”
johnclarke on April 14 at 12:52 p.m.
Help educate us Mr. Adams. How exactly did he help drown the taxpayers?
liarsinnews on April 14 at 2:37 p.m.
John Clarke:
For starters lowering interest rates to zero % which rewarded crooked bankers who belonged in the Iron Bar Hotel. I`ll just mention Fannie and Freddie, you should know that story. And how about his looking the other way when taxpayer stimulus money was used for bonus checks with his blessings and condoning it saying, Obama was right in handing out corporate welfare. And John, you know I`m sure, he will need another printing press to handle the inflation that he is contributing too. It has to happen and Bernanke knows it is inevitable and refuses to increase interest rates. I for one do not think it is difficult to secure a loan if your credit is good. My credit score is over 800 and I find it hard to believe the signature loan amount with out collateral I have, WOW I`m not telling my wife of 58 years.
liarsinnews on April 14 at 2:42 p.m.
ADDENDUM to Mr. Clarke: I have another list of stuff but it seems to me you may be pulling my leg and know about the obvious the MSM hides from the public.
chump on April 14 at 3:28 p.m.
Might I brave my own additional remarks gentlemen, even if for the sake of the silent reader curious about the federal reserve.
The Federal Reserve system is based upon what is called, “fractional reserve banking” and could well be described as “drowning” the taxpayer.
Fractional banking requires a small amount of monetary units available for cash, the rest may be invested. It’s a diabolical money generating scheme, that amounts to having banks (all FDIC institutions are such)
Someone deposits $10 in a bank.
The bank loans $7-$9 (depending upon checking/savings accts) for someone else to buy a whatsit.
The seller of the whatsit takes his $8 and deposits it in the bank.
The bank then lends out $7 to someone buying a thisthat.
The seller of the thisthat takes his $7 and deposits in the bank.
The bank then loans…
In each lending transaction, the bank is skimming off the top (their interest rate), and can possibly “create” (or “drown” if you like) $90 from every $10 deposit, scamming every transaction.
Does anyone else feel that banking as an investing institution is outdated? What service do they provide that can’t be created by private or non-profit institutions? Did you know that the FR is not a government entity? Why should a private cabal fleece (or “drown” if you like) a states as powerful as this union? Is there a Sherman Anti-Trust exemption for the Federal Reserve on currency issuance?
More about fractional reserve banking on wiki http://en.wikipedia.org/wiki/Fractional-reserve_banking
There are many interesting discussions going on about alternatives to this system. for example http://www.monetary.org/ has already introduced legislation that would replace this federal reserve fractional system.
There is so many better alternatives, so we’d be wise to learn more, and voice our opinions about what will replace this broken one we have.
tinybobidaho on April 14 at 3:39 p.m.
Quote: “On the jobs front, Bernanke was encouraged by the 162,000 jobs added in March, the most in three years. However, the moderate pace of the economic recovery means that the 8 million-plus jobs lost by the recession won’t quickly return. Bernanke said it will take a “significant amount of time” to restore those positions. He didn’t say how long.
The unemployment rate has been stuck at 9.7 percent for three straight months, close to its highest levels since the early 1980s.”
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I am getting so sick of this! These people just cannot be this stupid! In the past year, Obama gave away 160,000 jobs a month to foreign workers who are here working on foreign work visas, not including the 8 million jobs that illegal aliens are allowed to hold in this country. You can’t improve the unemployment rate for American workers by doing stupid stuff like this!
leekinny on April 14 at 3:52 p.m.
the article states….
“The unemployment rate has been stuck at 9.7 percent for three straight months, close to its highest levels since the early 1980s”………
I wonder who was president at this time. And, if the tea party people would still want to put him on Mount Rushmore. Or would they prefer someone else.
leekinny on April 14 at 4:10 p.m.
A whole bunch of you guys cheered for the trickle down theory. I agree that it’s a great idea. But, only if the people at the top are patriotic enough to invest in their own communities, businesses and employees. We’ve allowed those who benefit from our country to stab the people in the back who rewarded them.
Another_Perspective on April 14 at 4:12 p.m.
Do you really believe anything the Government says now days?
We should call this Gullible’s Travels.
spokanada on April 14 at 4:14 p.m.
I can’t believe Obama is getting blamed for the economy that Bush left for us. I thought Obama was just a junior senator from Illinois while Bush was busy sinking the economy. How is this his fault?
Seems rather childish!
leekinny on April 14 at 4:15 p.m.
I believe you guys are being fooled, used and encouraged to vote against your needs.
leekinny on April 14 at 4:37 p.m.
Another_Perspective……
The government is us. It’s how we group together and make decisions from small little neighborly gatherings to the larger matters of state and national importance.
The government we get we deserve. You see, we are expected to take a concerned involvement, not only in the matters of local community, but, also, as best, we honestly can, in matters of national importance.
The honesty part is of great importance. If we surrender our will to those reactionary celebrities who tickle our current passions we do not live up to our obligations of responsible citizenship.
chump on April 14 at 4:42 p.m.
@spokanada
I believe anyone blaming Obama for the economy, or Bush for that matter is very unaware of the function of the President. For those aware, all budget bills begin in the US House.
Now, you can find a backdoor to argue that the Pres does indeed affect the economy- the federal reserve chairmanship (Pres nomination, Senate approval).
Inasmuch, then it is not a question of Side 1 or Side 2 of Party A, but the banking figure behind the whole lot of them. There is no doubt that the “bubble”s created by Greenspan’s policy are a fundamental element of our problems today.
Rather than biting the bait of Side 1 or 2 of Party A, one might correctly inquire- what is behind the Fed Res’ actions? Bloomberg inquired such with a FOIA request. Thing is, the FR denied the request- http://www.bloomberg.com/apps/news?pid=20601087&sid=apx7XNLnZZlc
Why? Because the FR is not an official arm of the government.
So, the aggravations about Bush or Obama seem to be much less important than a secretive for-profit company which has no accountability to the citizenry.
Barking up the right tree could get you answers. Barking up the wrong tree could just get you dizzy chasing your own tail :P
leekinny on April 14 at 4:49 p.m.
chump……
Not only does the president have the power of, ‘the bully pulpit’, he also has the power of the veto. That power attaches the president’s name to ALL legislation that is signed.
chump on April 14 at 5:01 p.m.
Well said lee, although it doesn’t change the fact that he is not the originator or source of a funding bill.
The President certainly states what he will and will not veto, but really- how often does that happen? If Party A brings it to him, he will massage what he wants throughout, but just because he is the CEO doesn’t mean he gets the credit of what the workers are doing, right?
Both Bush as well as Obama have the luxury of a similar Side of Party A to harmonize with… so it goes even less to the President’s credit (one needn’t “bully” his own guys ;-).
leekinny on April 14 at 5:42 p.m.
Huge difference, because the GOP has been moving into a direction of walking lock step to the right.
During the last two Congressional elections we have let many Conservatives into our party. We are often portrayed as being of one thought and mind by Conservatives who find it to their advantage, but we;re not.
There are many caucuses within our party representing a variety of interests. The majority of members associate with all the different groups for reasons benefiting their constituents.
Conservatives have much more influence within our party than those obstructing from the outside. For example, the greatest clarification on public funding of abortion came within our party, with the acceptance of Speaker Pelosi, Leader Reid and President Obama. All of them caught hell from women’s groups and are catching it still.
As a progressive, I, can tell you the president and the leadership of the party are far from giving in to any of our political desires. It’s very laughable, especially to the most left among us to refer to this president as a socialist.
If you remember after the election the right wing talking heads were calling his an election a victory for center right politics. On some issues, to our sadness, they may prove to be right.
liarsinnews on April 14 at 6:22 p.m.
I was saving the following subject for Mr. Clarke if he responded to the answer I gave him regarding his question. No response from him, so here goes with another point about the fed.
Derivatives have in the past been a dirty little secret. Wall Street has said many times, “To say derivative accounting in American is in the sewer is an insult to sewage.” My point, once Obama embraced mister folksy, Warren Buffett, who heretofore stayed clear of derivatives, but since his love fest with the Pres, Buffett has his own scheme using derivatives (he has not traded them in the past) . Shortly after the SEC commission was exposed for doing nothing and looking the other way, the talk of the town (DC) was to outlaw derivative trading. My what great friendships do when your in bed with one another, i.e. anything goes. Mr. Bernanke changed his tune and his “comments” about trading at the worlds largest casino, Wall Street.
chump on April 14 at 11:10 p.m.
@lee,
Forgive me, but I have not assimilated into, nor understand the gray terms you use with “right” “left” “conservative” and “progressive.” Honestly, I see much of this as either contrivances, or ready-made boxes for the self afflicted to apply to their own mind. Nor do I watch television (haven’t for 15 years, but I know that makes me more weird to those that do), so I don’t know who the right wing talking heads are, nor what they’ve said. sorry.
I can however, see outcomes from both sides of Party A. I look at the GOP domination of both houses from ‘94 - ‘06, and I see that the size of the bloating in the federal parasite (I know, it’s a bit strong verbiage, but 100% how I feel about it) nearly triple in size (not to include the Wall Street bailout, which could increase it 10 times!).
I am certain there are members of both parties who are neither war mongers, nor socialist; although, I speak generally about the party leadership (what Eric Blair called fictionally, “Inner-Party Members).
These same neutrons / independents are being preyed upon wholesale within this tea-party movement primarily by the GOP. Trying to bewitch them into those self-afflicted boxes with an outcome to support whichever inner-party member they’re going to promote.
Unfortunately, this charade is far too captivating- especially for the self-afflicted, and they’re unable or unwilling to see the man behind the curtain. The same figures irrespective of who is playing the part center-stage: The Wall Street Gang (to include the Fed Res and Chopper Ben).
( I quickly poked around and found an easy article showing a common thread- http://www.cbsnews.com/8301-31727_162-20001981-10391695.html )
Instead of watching the captivating lights center-stage, I believe sweat and attention is better spent uncovering what I know to be immoral- fractional reserve banking. (sounds kooky, I know. But when looked at big-picture without the distractions of self-manacled fielties to banners, clans and tribes, it really is the matter that needs addressing.)