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The Crisis In Europe Has Affected The Us Economy By Acting As A Drag On Our Exports, Weighing On Business And Consumer Confidence And Pressuring Us Financial Markets And Institutions.

-Ben Bernanke

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The Crisis In Europe

Ben Bernanke

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The Crisis In Europe Has Affected The Us Economy By Acting As A Drag On Our Exports, Weighing On Business And Consumer Confidence And Pressuring Us Financial Markets And Institutions.

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Among The Largest Banks, The Capital Ratios Remain Good And I Don’t Expect Any Serious Problems . . . . Among The Large, Internationally Active Banks That Make Up A Very Substantial Part Of Our Banking System.

It Must Be Awfully Frustrating To Get A Small Raise At Work And Then Have It All Eaten By A Higher Cost Of Commuting.

Developments In Financial Markets Can Have Broad Economic Effects Felt By Many Outside The Markets.

Economics Is A Highly Sophisticated Field Of Thought That Is Superb At Explaining To Policymakers Precisely Why The Choices They Made In The Past Were Wrong. About The Future, Not So Much.

A Gold Standard Doesn't Imply Stability In The Prices Of The Goods And Services That People Buy Every Day, It Implies A Stability In The Price Of Gold Itself.

The Crisis In Europe Has Affected The Us Economy By Acting As A Drag On Our Exports, Weighing On Business And Consumer Confidence And Pressuring Us Financial Markets And Institutions.

The Best Approach Here, If At All Possible, Is To Use Supervisory And Regulatory Methods To Restrain Undue Risk-taking And To Make Sure The System Is Resilient In Case An Asset-price Bubble Bursts In The Future.

I Served Seven Years As The Chair Of The Princeton Economics Department Where I Had Responsibility For Major Policy Decisions, Such As Whether To Serve Bagels Or Doughnuts At The Department Coffee Hour.

Both Humanity's Capacity To Innovate And The Incentives To Innovate Are Greater Today Than At Any Other Time In History.

The Lesson Of History Is That You Do Not Get A Sustained Economic Recovery As Long As The Financial System Is In Crisis.

The Risk Exists That, With Aggregate Demand Exhibiting Considerable Momentum, Output Could Overshoot Its Sustainable Path, Leading Ultimately In The Absence Of Countervailing Monetary Policy Action To Further Upward Pressure On Inflation.

The People Who Best Use Their Advantages, Or Overcome Adversity, And Work Honestly Are Those Most Worthy Of Admiration.

The Economist John Maynard Keynes Said That In The Long Run, We Are All Dead. If He Were Around Today He Might Say That, In The Long Run, We Are All On Social Security And Medicare.

The Federal Reserve Is Not Currently Forecasting A Recession.

Federal Reserve

Given The Central Role Of Effective, Firmwide Risk Management In Maintaining Strong Financial Institutions, It Is Clear That Supervisors Must Redouble Their Efforts To Help Organizations Improve Their Risk-management Practices...we Are Also Considering The Need For Additional Or Revised Supervisory Guidance Regarding Various Aspects Of Risk Management, Including Further Emphasis On The Need For An Enterprise-wide Perspective When Assessing Risk.

I Am Confident That We Will Meet Whatever Challenges The Future May Bring.

Economics Is A Very Difficult Subject. I've Compared It To Trying To Learn How To Repair A Car When The Engine Is Running.

Achieving Price Stability Is Not Only Important In Itself, It Is Also Central To Attaining The Federal Reserve's Other Mandate Objectives Of Maximum Sustainable Employment And Moderate Long-term Interest Rates.

The More Guidance A Central Bank Can Provide The Public About How Policy Is Likely To Evolve The Greater The Chance That Market Participants Will Make Appropriate Inferences.

It's True That The Federal Reserve Faces A Lot Of Political Pressure And Is Unpopular In Many Circles.

Education - Lifelong Education For Everyone - From Toddlers To Workers Well Advanced In Their Careers - Is Indeed An Excellent Investment For Individuals And Society As A Whole.

Importantly, In The 1930s, In The Great Depression, The Federal Reserve, Despite Its Mandate, Was Quite Passive And, As A Result, Financial Crisis Became Very Severe, Lasted Essentially From 1929 To 1933.

Great Depression

The Amount Of Currency In Circulation Is Not Changing. The Money Supply Is Not Changing In Any Significant Way.

I Come From Main Street, From A Small Town That's Really Depressed.

[virtual Currencies] May Hold Long-term Promise, Particularly If The Innovations Promote A Faster, More Secure And More Efficient Payment System.

Over The Years, The U.s. Economy Has Shown A Remarkable Ability To Absorb Shocks Of All Kinds, To Recover, And To Continue To Grow.

Inflation Is Certainly Low And Stable And, Measured In Unemployment And Labour-market Slack, The Economy Has Made A Lot Of Progress. The Pace Of Growth Is Disappointingly Slow, Mostly Because Productivity Growth Has Been Very Slow, Which Is Not Really Something Amenable To Monetary Policy. It Comes From Changes In Technology, Changes In Worker Skills And A Variety Of Other Things, But Not Monetary Policy, In Particular.

Monetary Policy Is Not A Panacea.

Monetary Policy

Life Is Amazingly Unpredictable; Any 22-year-old Who Thinks They Know Where They Will Be In 10 Years, Much Less In 30, Is Simply Lacking Imagination.

Monetary Policy Cannot Do Much About Long-run Growth, All We Can Try To Do Is To Try To Smooth Out Periods Where The Economy Is Depressed Because Of Lack Of Demand

September And October Of 2008 Was The Worst Financial Crisis In Global History, Including The Great Depression.

It Takes About Two And A Half Percent Growth Just To Keep Unemployment Stable.

Weaker Currencies Abroad Mean A Strong Dollar, And A Stronger Dollar, Together With A Weak Global Environment, Is A Drag On The U.s. Economy. So It's Important, As It Affects Overall Levels Of Production And Employment In The U.s. There Are Many Domestic Industries Doing Well In The United States, Notwithstanding A Strong Dollar.

We Do Not Expect Significant Spillovers From The Subprime Market To The Rest Of The Economy Or To The Financial System.

The Federal Reserve Will Not Monetize The Debt.

Federal Reserve

Although Low Inflation Is Generally Good, Inflation That Is Too Low Can Pose Risks To The Economy - Especially When The Economy Is Struggling.

The American People Are Among The Most Productive In The World. We Have The Best Technologies. We Have - Great Universities. We Have Entrepreneurs.

...the Federal Reserve Has The Capacity To Operate In Domestic Money Markets To Maintain Interest Rates At A Level Consistent With Our Economic Goals

Nobody Likes To Fail But Failure Is An Essential Part Of Life And Of Learning. If Your Uniform Isn't Dirty, You Haven't Been In The Game.

A Meritocracy Is A System In Which The People Who Are The Luckiest In Their Health And Genetic Endowment; Luckiest In Terms Of Family Support, Encouragement And, Probably, Income; Luckiest In Their Educational And Career Opportunities; And Luckiest In So Many Other Ways Difficult To Enumerate - These Are The Folks Who Reap The Largest Rewards.

If You Want To Understand Geology, Study Earthquakes. If You Want To Understand The Economy, Study The Depression.

I Am Very Proud Of My Nerd-dom.

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House Prices Have Risen By Nearly 25 Percent Over The Past Two Years. Although Speculative Activity Has Increased In Some Areas, At A National Level These Price Increases Largely Reflect Strong Economic Fundamentals.

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The Crisis And Recession Have Led To Very Low Interest Rates, It Is True, But These Events Have Also Destroyed Jobs, Hamstrung Economic Growth And Led To Sharp Declines In The Values Of Many Homes And Businesses.

The Benefit Of Appointing A Hawkish Central Banker Is The Increased Inflation-fighting Credibility That Such An Appointment Brings.

If You Are Asking Me If I Would Advocate That The Chinese Go To Greater Flexibility In Their Exchange Rate, I Certainly Would.

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I Generally Leave The Details Of Fiscal Programs To The Administration And Congress. That's Really Their Area Of Authority And Responsibility, And I Don't Think It's Appropriate For Me To Second Guess.

The Risk That The Economy Has Entered A Substantial Downturn Appears To Have Diminished Over The Past Month Or So.

While Rising Delinquencies And Foreclosures Will Continue To Weigh Heavily On The Housing Market This Year, It Will Not Cripple The U.s.

Our Mission, As Set Forth By The Congress Is A Critical One: To Preserve Price Stability, To Foster Maximum Sustainable Growth In Output And Employment, And To Promote A Stable And Efficient Financial System That Serves All Americans Well And Fairly.

I Think One Of The Lessons Of The Depression - And This Is Something That Franklin Roosevelt Demonstrated - Was That When Orthodoxy Fails, Then You Need To Try New Things. And He Was Very Willing To Try Unorthodox Approaches When The Orthodox Approach Had Shown That It Was Not Adequate.

It's The Price Of Success: People Start To Think You're Omnipotent.

Price Of Success

The Central Bank Needs To Be Able To Make Policy Without Short Term Political Concerns.

In The Future, My Communications With The Public And With The Markets Will Be Entirely Through Regular And Formal Channels.

The More Important Reason Is That The Research Itself Provides An Important Long-run Perspective On The Issues That We Face On A Day-to-day Basis.

Over The Years, The U.s. Economy Has Shown A Remarkable Ability To Absorb Shocks Of All Kinds, To Recover, And To Continue To Grow. Flexible And Efficient Markets For Labor And Capital, An Entrepreneurial Tradition, And A General Willingness To Tolerate And Even Embrace Technological And Economic Change All Contribute To This Resiliency.

If Current Trends Continue, The Typical U.s. Worker Will Be Considerably More Productive Several Decades From Now. Thus, One Might Argue That Letting Future Generations Bear The Burden Of Population Aging Is Appropriate, As They Will Likely Be Richer Than We Are Even Taking That Burden Into Account.

I Think That Having Good Data, Good Statistics-and The United States Generally Has Better Macroeconomic Statistics Than Most Countries-and Having Good Economists To Interpret Those Data And Present The Policy Alternatives, Has A Substantially Beneficial Effect On Policymaking In The United States.

If Wall Street Crashes, Does Main Street Follow? Not Necessarily.

The U.s. Government Has A Technology, Called A Printing Press (or, Today, Its Electronic Equivalent), That Allows It To Produce As Many U.s. Dollars As It Wishes At Essentially No Cost.

I Don't See Much Evidence Of An Equity Bubble.

The Economic Repercussions Of A Stock Market Crash Depend Less On The Severity Of The Crash Itself Than On The Response Of Economic Policymakers, Particularly Central Bankers.

The Sources Of Deflation Are Not A Mystery. Deflation Is In Almost All Cases A Side Effect Of A Collapse Of Aggregate Demand.. A Drop In Spending So Severe That Producers Must Cut Prices On An Ongoing Basis In Order To Find Buyers.

I'd Throw Dollars Out Of Helicopters If I Had To, To Stimulate The Economy.

Like Gold, U.s. Dollars Have Value Only To The Extent That They Are Strictly Limited In Supply. But The U.s. Government Has A Technology, Called A Printing Press (or, Today, Its Electronic Equivalent), That Allows It To Produce As Many U.s. Dollars As It Wishes At Essentially No Cost. By Increasing The Number Of U.s. Dollars In Circulation, Or Even By Credibly Threatening To Do So, The U.s. Government Can Also Reduce The Value Of A Dollar In Terms Of Goods And Services, Which Is Equivalent To Raising The Prices In Dollars Of Those Goods And Services.

How Much Would You Pay To Avoid A Second Depression?

Great Depression

In Fact, The World Needs More Nerds.

If You Are Not Happy With Yourself, Even The Loftiest Achievements Won't Bring You Much Satisfaction.

I And Others Were Mistaken Early On In Saying That The Subprime Crisis Would Be Contained. The Causal Relationship Between The Housing Problem And The Broad Financial System Was Very Complex And Difficult To Predict.

The Fed Is Totally Open.

I Don't Fully Understand Movements In The Gold Price.

The Basic Prescription For Preventing Deflation Is Therefore Straightforward, At Least In Principle: Use Monetary And Fiscal Policy As Needed To Support Aggregate Spending, In A Manner As Nearly Consistent As Possible With Full Utilization Of Economic Resources And Low And Stable Inflation. In Other Words, The Best Way To Get Out Of Trouble Is Not To Get Into It In The First Place.

Speaking As Somebody Who Has Been Happily Married For 35 Years, I Can't Imagine Any Choice More Consequential For A Lifelong Journey Than The Choice Of A Traveling Companion.

Nobody Really Understands Gold Prices And I Don't Pretend To Understand Them Either.

There's No Denying That A Collapse In Stock Prices Today Would Pose Serious Macroeconomic Challenges For The United States. Consumer Spending Would Slow, And The U.s. Economy Would Become Less Of A Magnet For Foreign Investors. Economic Growth, Which In Any Case Has Recently Been At Unsustainable Levels, Would Decline Somewhat. History Proves, However, That A Smart Central Bank Can Protect The Economy And The Financial Sector From The Nastier Side Effects Of A Stock Market Collapse.

Every Effort Needs To Be Made To Try And Offset The Costs Of Katrina And Rita By Reductions In Other Government Programs, Especially Those That Are Wasteful, Duplicative And Ineffective.

With Respect To Their Safety, Derivatives, For The Most Part, Are Traded Among Very Sophisticated Financial Institutions And Individuals Who Have Considerable Incentive To Understand Them And To Use Them Properly.

A Collapse In U.s. Stock Prices Certainly Would Cause A Lot Of White Knuckles On Wall Street. But What Effect Would It Have On The Broader U.s. Economy? If Wall Street Crashes, Does Main Street Follow? Not Necessarily.

The Impact On The Broader Economy And Financial Markets Of The Problems In The Subprime Markets Seems Likely To Be Contained.

We’ve Never Had A Decline In House Prices On A Nationwide Basis. So, What I Think What Is More Likely Is That House Prices Will Slow, Maybe Stabilize, Might Slow Consumption Spending A Bit. I Don’t Think It’s Going To Drive The Economy Too Far From Its Full Employment Path, Though.

It Is Not The Responsibility Of The Federal Bank - Nor Would It Be Appropriate - To Protect Lenders And Investors From The Consequences Of Their Decisions

I Don't Think That Chinese Ownership Of U.s. Assets Is So Large As To Put Our Country At Risk Economically.

Under A Cold Turkey Strategy, At Each Policy Meeting The Federal Open Market Committee Would Make Its Best Guess About Where It Ultimately Wants The Funds Rate To Be And Would Move To That Rate In A Single Step.

The Gses Are Adequately Capitalized. They Are In No Danger Of Failing.

I Assure This Committee That, If I Am Confirmed, I Will Be Strictly Independent Of All Political Influences... Essential To That Institution's Ability To Function Effectively And Achieve Its Mandated Objectives.

Investment Banks Manage To Go Bankrupt Through Their Investment-banking Activities, Commercial Banks Manage To Go Bankrupt Through Their Commercial-banking Activities.

Commercial Banks

If I Am Confirmed, I Am Confident That My Colleagues On The Federal Open Market Committee And I Will Maintain The Focus On Long-term Price Stability As Monetary Policy's Greatest Contribution To General Economic Prosperity And Maximum Employment.

Not All Information Is Beneficial.

To Avoid Large And Unsustainable Budget Deficits, The Nation Will Ultimately Have To Choose Among Higher Taxes, Modifications To Entitlement Programs Such As Social Security And Medicare, Less Spending On Everything Else From Education To Defense, Or Some Combination Of The Above.

The Financial Crisis Appears To Be Mostly Behind Us, And The Economy Seems To Have Stabilized And Is Expanding Again.

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