Bernanke: The Fed Has Only Two Tools Remaining to Boost the Economy

By:  Bob Adelmann
09/09/2011
       
Bernanke: The Fed Has Only Two Tools Remaining to Boost the Economy

In his talk on Thursday to the Economic Club of Minneapolis, Federal Reserve Chairman Ben Bernanke warned the Congressional Supercommittee not to cut government spending by too much, and that if the economy continues to slide into another recession, the Fed has tools to meet the challenge.

Speaking over the heads of his audience directly to the Supercommittee, Bernanke warned that “while prompt and decisive action to put the government’s finances on a sustainable trajectory is urgently needed, fiscal policymakers [i.e., you members of the Supercommittee] should not, as a consequence, disregard the fragility of the economic recovery.” In other words, it’s OK to do a little nibbling around the edges of government spending, but anything that would cut such spending seriously needs to be avoided altogether, at least until the economy gets back on its feet.

 And that’s the problem. With the economy stalled, consumer spending slowing, factory production dropping, job growth at zero, 14 million Americans unemployed, jobless claims increasing, 42 million on food stamps, and consumer and investor confidence at its lowest levels in years, jumpstarting the economy is going to be a Herculean task even for the Fed.

In his talk on Thursday to the Economic Club of Minneapolis, Federal Reserve Chairman Ben Bernanke (photo) warned the Congressional Supercommittee not to cut government spending by too much, and that if the economy continues to slide into another recession, the Fed has tools to meet the challenge.

Speaking over the heads of his audience directly to the Supercommittee, Bernanke warned that “while prompt and decisive action to put the government’s finances on a sustainable trajectory is urgently needed, fiscal policymakers [i.e., you members of the Supercommittee] should not, as a consequence, disregard the fragility of the economic recovery.” In other words, it’s OK to do a little nibbling around the edges of government spending, but anything that would cut such spending seriously needs to be avoided altogether, at least until the economy gets back on its feet.

 And that’s the problem. With the economy stalled, consumer spending slowing, factory production dropping, job growth at zero, 14 million Americans unemployed, jobless claims increasing, 42 million on food stamps, and consumer and investor confidence at its lowest levels in years, jumpstarting the economy is going to be a Herculean task even for the Fed.

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