7:46 AM
admin
Federal Reserve Chairman Ben Bernanke acknowledged the severe challenges facing the U.S. economy in hisJackson Hole speechFriday morning, but renewed his view fiscal, not monetary, solutions are necessary to deal with both the current economic soft patch and the longer-term structural hurdles to growth.
While Bernanke urged lawmakers to take steps like redesigning tax policy and spending programs, he also warned that pulling too many levers to quickly could threaten a fragile recovery. From the speech:
Although the issue of fiscal sustainability must urgently be addressed, fiscal policymakers should not, as a consequence, disregard the fragility of the current economic recovery. Fortunately, the two goals of achieving fiscal sustainability–which is the result of responsible policies set in place for the longer term–and avoiding the creation of fiscal headwinds for the current recovery are not incompatible. Acting now to put in place a credible plan for reducing future deficits over the longer term, while being attentive to the implications of fiscal choices for the recovery in the near term, can help serve both objectives.
While there was no promise of further action from the Fed, the central bank did pledge earlier this month to keep interest rates low until at least mid-2013 unless economic activity considerably improves.
The market sold off following the Bernanke speech, but not in the panicked fashion that has marked a number of trading days this month. Minutes after Bernanke’s remarks were released, and while the Fed chairman was still delivering his speech, the Dow Jones industrial average was off 200 points to 10,950, the S&P 500 21 points to 1,139 and the Nasdaq 29 points to 2,390.
Ten-year Treasury yields dipped to 2.16% as investors moved out of equities and into U.S. bonds, while gold rallied $16.50 to $1,779.70 an ounce.
In his speech, Bernanke also noted that conditions are different than they were a year ago and considerably improved from the peak of the financial crisis almost three years ago. For one thing, he noted, “the U.S. banking system is generally much healthier now, with banks holding substantially more capital.” While that may be true, it has not stopped the market from questioning the capital position of firms likeBank of America, which got a stamp of approval from Berkshire Hathaway’s Warren Buffett Thursday, when the billionaire pumped $5 billion into the bank for a preferred stake.
Earlier Friday, the Commerce Department’s second take on second-quarter gross domestic product showed the U.S. economy growing 1% in the April-June period, down from a prior estimate of 1.3%, but still above the most bearish forecasts.
Source: forbes.com
please give me comments thanks
Posted in: 
0 comments:
Post a Comment