Federal Reserve Chairman Ben Bernanke spoke Monday at the
University of Michigan's Ford School, addressing students on
monetary policy. In the conversation setting, the Chairman
addressed pressing issues such as the Debt Ceiling, Fed Policy,
and Fed Independence.
Bernanke opened the conversation at the school by commenting
on the state of fiscal policy in the U.S. He said that there
remains two big issues in fiscal policy, the long run debt
sustainability of the U.S. and the fragile economy.
Bernanke noted that the Fiscal Cliff threatened the recovery
from the financial crisis and is afraid of the looming fiscal
problems ahead. For 2013, Bernanke expects a fiscal drag of 1-1.5
In regards to current policy choices, Bernanke reiterated that
the Fed has a dual mandate, full employment and stable inflation.
Bernanke thus reiterated that it is the high level of
unemployment that has continually allowed him to air on the side
of easing policies.
Although longer-term inflation risks remain, Bernanke was coy
on the threat of high inflation now and noted that inflation has
remained below the Fed's target of near 2 percent inflation for
Bernanke also commented on the state of the economy in the
discussion, noting that growth has slowed globally for a variety
of reasons. The Chairman highlighted the weakness in Europe
resulting from policies aimed at resolving the debt crisis has
been a large drag on the economy, however those effects seem to
be waning recently.
Also, he noted weakness in emerging markets recently has also
been a drag on the global economy and noted that Chinese leaders
have engineered a slower economy to focus more on domestic
consumption than export-driven growth.
Lastly, Bernanke spoke about the Fed's independence and the
movement to increase oversight on the Fed. Bernanke noted that
the Fed is fully audited by both private sector accountants but
also by the GAO.
Notably, Bernanke said that the Federal Reserve Act exempts
audits to policy decisions made by the FOMC and it is this clause
that the audit the Fed movement wants to change. However,
changing this clause would allow the GAO, and thus politicians,
to audit and judge any and every decision made by the Fed. Thus,
it would completely jeopardize the Fed's independence and limit
its ability to act quickly in times of crisis.
(c) 2013 Benzinga.com. Benzinga does not provide investment
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