Bernanke Touts Quantitative Easing in Jackson Hole Speech

By:  Thomas R. Eddlem
09/04/2012
       
Bernanke Touts Quantitative Easing in Jackson Hole Speech

 Federal Reserve Chairman Ben Bernanke signaled that the Fed would return to another round of “quantitative easing” (QE) in his August 31 annual address from Jackson Hole, Wyoming, a speech that also claimed economic success for the Fed's past two QE purchases of federal debt securities.

Federal Reserve Chairman Ben Bernanke signaled that the Fed would return to another round of “quantitative easing” (QE) in his August 31 annual address from Jackson Hole, Wyoming, a speech that also claimed economic success for the Fed's past two QE purchases of federal debt securities.

The Wall Street Journal's MarketWatch.com noted that Bernanke “made it clear that he’s ready to pull the trigger. The only question that remains is whether it will happen in mid-September or December.” The Federal Reserve has also kept its “Federal Rate” interest rate to banks at historic lows, from one-fourth of one percent to zero, in an effort to spur more borrowing. Bernanke said in his address that “the Federal Reserve will provide additional policy accommodation as needed to promote a stronger economic recovery and sustained improvement in labor market conditions in a context of price stability.”

Bernanke also touted the fact that "a study using the Board's FRB/US model of the economy found that, as of 2012, the first two rounds of LSAPs [Large-Scale Asset Purchases of Federal debt] may have raised the level of output by almost three percent and increased private payroll employment by more than two million jobs, relative to what otherwise would have occurred.” But the Federal Reserve chairman does admit that “obtaining precise estimates of the effects of these operations on the broader economy is inherently difficult, as the counterfactual--how the economy would have performed in the absence of the Federal Reserve's actions--cannot be directly observed.” The current economic recovery is the weakest on record, despite the claimed success of the Fed's QE. In fact, if QE has been so successful, why is it that, as Bernanke claimed, “following every previous U.S. recession since World War II, the unemployment rate has returned close to its pre-recession level, and, although the recent recession was unusually deep, I see little evidence of substantial structural change in recent years.”

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Photo of Ben Bernanke at Jackson Hole: AP Images

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