The highly anticipated speech by Federal Reserve Chairman Ben Bernanke at an annual symposium held in Jackson Hole, WY, yielded little in the way of new information. Instead, the chairman avoided the issue of another anticipated stimulus program (quantitative easing/QE III), played the part of cheerleader for long-term growth prospects and even needled a Congress, one that has been so critical of the Fed, over its woeful handling of the debt ceiling/budget debate.
Bernanke reiterated to the annual meeting about Federal Reserve montary policy held by Fed Bank of Kansas City the message the Fed has only recently started admitting: that the recession was much deeper than originally thought and the recovery was going to continue to be slower than anticipated and hoped. Much of this can be tied to the ongoing housing market woes and their impact on household wealth as well as employment levels. Still, Bernanke spent much of his speech wearing proverbial rose-colored glasses:
“Notwithstanding the severe difficulties we currently face, I do not expect the long-run growth potential of the U.S. economy to be materially affected by the crisis and the recession if--and I stress if--our country takes the necessary steps [such as more proactive housing and monetary policies] to secure that outcome. Economic healing will take a while, and there may be setbacks along the way. However, the healing process should not leave major scars.” Bernanke boasted of the U.S. economy’s diversity, traditional strong market advantages, entrepreneurial culture and technological leadership, as well. However, the Fed chairman did touch on worries for the not-so-distant future: health care costs, entitlements of an aging population and a K-12 school system that “poorly serves a substantial portion of our population.”
In what appeared a thinly veiled shot at Congressional lawmakers, Bernanke noted U.S. businesses and consumers “would be well served by a better process for making fiscal decisions:”
“The negotiations that took place over the summer disrupted financial markets and probably the economy as well, and similar events in the future could, over time, seriously jeopardize the willingness of investors around the world to hold U.S. financial assets or to make direct investments in job-creating U.S. businesses…fiscal policymakers could consider developing a more effective process.”
Brian Shappell, NACM staff writer