Yesterday, Ben Bernanke gave his scheduled Press Conference.
While there were few, if any, disclosures that would be considered “new,” I did feel as if many of his comments were notable. While I could comment extensively upon his remarks of yesterday – as I partially or fully disagree with many of them – I will only address a few items.
His comments, as accurately as I can relay them, are seen in italics below:
@47:20 “…we have a lot of experience understanding how financial conditions…how they effect the economy…”
my comment: While The Federal Reserve undoubtedly has immense collective experience, both on a direct (through observation) and indirect (through research of past economic events), the question I would raise is the following: If our current economic situation is very dissimilar to previous ones, how does that change the value of this experience? I think a very strong case can be made that our current economic situation is (vastly) dissimilar to those previous.
Bernanke’s comments on the U.S. Dollar were interesting. After earlier seeming to imply that the U.S. Dollar should be officially addressed by the Treasury Department, Bernanke then later made a few comments.
@ 49:30: “We do believe that a strong and stable Dollar is in the interest of the United States and is in the interest of the global economy.”
@49:42: “Our view is that the best thing we can do for the Dollar is first to keep the purchasing power of the Dollar strong by keeping inflation low, and by creating a strong economy…”
and this, said in response to the idea of a problematical weak Dollar:
@50:12: “…I don’t think I really want to address a hypothetical which I really don’t anticipate.”
my comment: Many thought that Bernanke’s comments on the Dollar indicate that the strength of the Dollar will “take a backseat” to that of efforts to promote a strong economy. As for myself, I think that the weakening of the Dollar has already caused significant problems, and that the Dollar is highly vulnerable to a substantial decline – one that will prove exceedingly harmful to the economy and financial markets. I have written of this situation extensively.
@54:00 there is a question as to the pace of the recovery, in which the “Reinhart and Rogoff book” is mentioned, as well as expectations placed on The Federal Reserve as far as its helping the economy to recover.
@57:03 “I do think that the pace will pick up over time. And I am very confident that, in the long run, that the U.S. will return to being the most productive, one of the fastest growing and dynamic economies in the world.
And it hasn’t lost any of the basic characteristics that made it the pre-eminent economy in the world before the crisis. And I think we will return to that status as we recover.”
my comment: This question and answer largely had to do with the pace of the economic recovery, and the causes as to why the pace appears slow. Much can be said about the conclusions being drawn from the Reinhart and Rogoff book, and how they are being applied to our current situation.
As for Bernanke’s claim that “I am very confident that, in the long run, that the U.S. will return to being the most productive, one of the fastest growing and dynamic economies in the world” and that The United States “…hasn’t lost any of the basic characteristics that made it the pre-eminent economy in the world before the crisis.” – I would have liked to have heard more of his thoughts on this issue. Time will tell if this comes about; I will be addressing the issue more in future posts.
The Special Note summarizes my overall thoughts about our economic situation
SPX at 1356.78 as this post is written