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12-06-2010, 06:07 AM
The legacy of GWB continues....
By Joshua Zumbrun
Bloomberg News
WASHINGTON — Federal Reserve Chairman Ben Bernanke said U.S. unemployment may take five years to fall to a normal level. "At the rate we're going, it could be four, five years before we are back to a more normal unemployment rate" of about 5 to 6 percent, Bernanke said Sunday on CBS' "60 Minutes" program.
He also said Fed purchases of Treasury securities beyond the $600 billion announced last month are possible. "It depends on the efficacy of the program" and the outlook for inflation and the economy, he said.
Bernanke and other Fed officials have defended the central bank's announcement that it will purchase $75 billion in Treasury securities a month through June to prop up a recovery so weak that only 39,000 jobs were created in November.
The unemployment rate last month rose to 9.8 percent, the highest level since April, the Labor Department said Dec. 3, three days after the Bernanke interview.
The economy, which grew 2.5 percent in the third quarter, is so weak that Bernanke said growth could fizzle out without support.
"It's very close to the border," he said. "It takes about 2.5 percent growth just to keep unemployment stable and that's about what we're getting. We're not very far from the level where the economy is not self-sustaining."
Bernanke said a return to a recession "doesn't seem likely" because sectors of the economy such as housing can't become much more depressed. Still, a long period of high unemployment could damage confidence and is "the primary source of risk that we might have another slowdown in the economy."
The Fed's decision to undertake new bond purchases sparked a political backlash in Washington. The program, known as quantitative easing, has been criticized by officials in countries including China and Germany.
Policymakers in emerging markets expressed concern it would drive down the dollar and cause a surge of capital abroad that created asset-price bubbles.
In Sunday's interview, Bernanke reiterated U.S. complaints that China's policy of limiting gains in its exchange rate is hurting the U.S. economy.
"Keeping the Chinese currency too low is bad for the American economy because it hurts our trade," he said. "It's bad for other emerging market economies. It's bad for China, because among other things it means China can't have its own independent monetary policy."
Two Republicans, Tennessee Sen. Bob Corker and Indiana Rep. Mike Pence, have proposed removing the Fed's maximum-employment mandate to focus the central bank on stable prices alone. Corker plans to sponsor such a bill next year.
Bernanke said fears of inflation are "overstated" and that keeping consumer prices under control isn't a diminished priority for the Fed.
Without action by the central bank, the economy might have tipped into a period of deflation, or a prolonged drop in prices, Bernanke said.
from: http://seattletimes.nwsource.com/html/nationworld/2013606082_bernanke06.html
By Joshua Zumbrun
Bloomberg News
WASHINGTON — Federal Reserve Chairman Ben Bernanke said U.S. unemployment may take five years to fall to a normal level. "At the rate we're going, it could be four, five years before we are back to a more normal unemployment rate" of about 5 to 6 percent, Bernanke said Sunday on CBS' "60 Minutes" program.
He also said Fed purchases of Treasury securities beyond the $600 billion announced last month are possible. "It depends on the efficacy of the program" and the outlook for inflation and the economy, he said.
Bernanke and other Fed officials have defended the central bank's announcement that it will purchase $75 billion in Treasury securities a month through June to prop up a recovery so weak that only 39,000 jobs were created in November.
The unemployment rate last month rose to 9.8 percent, the highest level since April, the Labor Department said Dec. 3, three days after the Bernanke interview.
The economy, which grew 2.5 percent in the third quarter, is so weak that Bernanke said growth could fizzle out without support.
"It's very close to the border," he said. "It takes about 2.5 percent growth just to keep unemployment stable and that's about what we're getting. We're not very far from the level where the economy is not self-sustaining."
Bernanke said a return to a recession "doesn't seem likely" because sectors of the economy such as housing can't become much more depressed. Still, a long period of high unemployment could damage confidence and is "the primary source of risk that we might have another slowdown in the economy."
The Fed's decision to undertake new bond purchases sparked a political backlash in Washington. The program, known as quantitative easing, has been criticized by officials in countries including China and Germany.
Policymakers in emerging markets expressed concern it would drive down the dollar and cause a surge of capital abroad that created asset-price bubbles.
In Sunday's interview, Bernanke reiterated U.S. complaints that China's policy of limiting gains in its exchange rate is hurting the U.S. economy.
"Keeping the Chinese currency too low is bad for the American economy because it hurts our trade," he said. "It's bad for other emerging market economies. It's bad for China, because among other things it means China can't have its own independent monetary policy."
Two Republicans, Tennessee Sen. Bob Corker and Indiana Rep. Mike Pence, have proposed removing the Fed's maximum-employment mandate to focus the central bank on stable prices alone. Corker plans to sponsor such a bill next year.
Bernanke said fears of inflation are "overstated" and that keeping consumer prices under control isn't a diminished priority for the Fed.
Without action by the central bank, the economy might have tipped into a period of deflation, or a prolonged drop in prices, Bernanke said.
from: http://seattletimes.nwsource.com/html/nationworld/2013606082_bernanke06.html