Federal Reserve Chairman Dr. Ben Bernanke, left, in Minneapolis last week with Tim Penny, former Congressman and co-founder of the Economic Club of Minnesota. (Photo by J. Lee)
By J. LEE
AAP staff writer
MINNEAPOLIS (Sept.8, 2011) — Over 800 “Who’s Who” from Minnesota’s Fortune 500 and largest corporations, financial institutions, investors, officials, policy makers and other entities gathered for the Minnesota Economic Club’s Inaugural event featuring Dr. Ben Bernanke, Chairman of the Federal Reserve System Board of Governors and Chairman of the Federal Open Market Committee, the System’s monetary policymaking body.
With an economics degree from Harvard University, MBA from Stanford University, and doctorate from Massachusetts Institute of Technology (M.I.T); teaching at Princeton University, M.I.T, and New York University, and experience with the Federal Reserve Banks of Philadelphia, Boston and New York – Dr. Bernanke rose to Chairmanship with a term from Feb. 1, 2006 to Jan. 31.2014, with his 14-year Board member terms ending January 31, 2020.
Stating that the global financial crisis started in 2008, Bernanke credited governments’ and the central banks’ actions, plus “substantial monetary and fiscal stimulus” as stabilizing efforts. He said that despite these efforts, “severe damage to the global economy, freezing of credit, sharp drops in asset prices, dysfunctions in financial markets, and blows to confidence sent global production and trade into free fall.”
Acknowledging that credit is still tight for small businesses, Bernanke spoke on “structural reform” in the financial sector and efforts to “enhance financial regulation and supervision, especially for the largest and systemically most important financial institutions.”
Because “the recession is deeper” and “recovery is weaker than previously thought”, Bernanke surmised that “economic growth” has been “insufficient to achieve sustained reductions in the unemployment rates.” He also referred to the high “prices of oil and other commodities and the effects of the disaster in Japan on global supply chains and production” as inflating prices and stressing consumer and business budgets.
Other stressors were “high level of unemployment, slow gains in wages for the employed, falling house prices, and high debt burdens.” But Bernanke also said that less labor and reduced labor costs is “an important restraining influence on inflation.” On the other hand, the Federal Open Market Committee has “dual mandates to promote maximum employment and price stability.”
In analyzing the business market, Bernanke reported growth in exports of manufactured products, and investments in equipment and software, but low business investment in nonresidential structures and difficulties in obtaining construction loans. The normal cycle of recovery has not happened because of the “severe and global recession”, “slump in the housing market and historic financial crisis.”
This includes the “tight credit for builders and potential homebuyers”, “concerns of borrowers and lenders about continued house price declines”, and the “depressed construction also hurting providers of related goods and services.”
Bernanke further stated that, “The weak housing market has in turn adversely affected financial markets and the flow of credit”. He expects the weak housing sector, continued financial volatility, and other factors to continue to restrain growth and recovery. This includes “cutting spending and reducing payrolls.”
Bernanke stated a need for “significant policy changes to address the increasing fiscal burdens that will be associated with the aging of the population and the ongoing rise in health-care costs” or “finances of the federal government will spiral out of control in coming decades, risking further severe economic and financial damage.” He called for a “credible plan for reducing future deficits over the long term”.
“Federal funds rate would be held at its current low level for at least two more years,” said Bernanke. He also stated that “the Federal Reserve has a range of tools that could be used to provide additional monetary stimulus” to “promote a stronger economic recovery in a context of price stability”, and that “the Federal Reserve will certainly do all that it can to help restore high rates of growth and employment in a context of prices stability.”
The Economic Club of Minnesota is a “leading venue for major speeches on business, finance and public policy.” The Club “provides a forum for national and international leaders to engage with Fortune 500 leaders, corporate executives, policymakers and community leaders to share ideas on successfully competing in the global economy. www.ecomn.org