Bernanke signals Fed is ready to prop up U.S. economy

August 27, 2010 by · 1 Comment
Filed under: Economic News 

Following up on my comments yesterday, it looks like inflation is going to be the route to try and bring a recovery.  The Federal Reserve and Ben Bernanke will fail in this attempt because at the end of the day, income (wages) will not keep prices and real growth where it is needed to stop deflation.

The recovery is basically over when we are getting statements like this from our central bank chairman.  It can become really dangerous when the Fed create uncertainty by talking about purchasing long term treasuries.   The gold market has sniffed this out and the price is almost nears its nominal high of $1,253.00 per ounce.

The more these type of discussions keep coming up, the more it shows that the Fed and Treasury so not have a handle on the macro-economic situation and the market is what is really dictating our conditions.  Bernanke said that deflation is not a risk to the economy but he is wrong, to him this is the biggest risk and that is why he is continuing the program of Quantitative Easing (QE aka: money printing).

Ask yourself this question, do you fight inflation with inflation or do you fight deflation with inflation?

NY Times – The Federal Reserve chairman, Ben S. Bernanke, said Friday that the central bank was determined to prevent the economy from slipping into a cycle of falling prices, even as he emphasized that he believed growth would continue in the second half of the year, “albeit at a relatively modest pace.”

To help sustain the economy, Mr. Bernanke gave his strongest indication yet that the Fed was ready to resume its large purchases of longer-term debt if the economy worsened, a move that would add to the Fed’s already substantial holdings.

“We have come a long way, but there is still some way to travel,” Mr. Bernanke said.

“I believe that additional purchases of longer-term securities, should the F.O.M.C. choose to take them, would be effective in further easing financial conditions,” Mr. Bernanke told a Fed policy symposium here. He was referring to the Federal Open Market Committee, the panel that sets interest rates, which Mr. Bernanke leads; some members have expressed unease over the prospect of the Fed pursuing any further monetary accommodation.

“Central bankers alone cannot solve the world’s economic problems,” he said.

Click Here to Continue Reading

Comments

One Response to “Bernanke signals Fed is ready to prop up U.S. economy”
  1. Peter L. Griffiths says:

    Quantitative easing enables the central bank to hand over new notes to the other banks without any fiscal need to inject them into the economy.

Speak Your Mind

Tell us what you're thinking...
and oh, if you want a pic to show with your comment, go get a gravatar!