Chairman of the Board of Governors of the Federal Reserve System
Ben Bernanke appeared before and made a statement to the Committee on the Budget, U.S. House of Representatives, on June 9, 2010. Chairman Bernanke's statement is summarized below (italics, emphasis added) in which he had the "opportunity to offer my views on current economic and financial conditions
and on issues pertaining to the federal budget."
Economic Outlook & Growth
"The recovery in economic activity that began in the second half of last year has continued at a moderate pace so far this year. Moreover, the economy - supported by stimulative monetary policy and the concerted efforts of policymakers to stabilize the financial system - appears to be on track to continue to expand through this year and next. The latest economic projections of Federal Reserve Governors and Reserve Bank presidents, which were made near the end of April, anticipate that real gross domestic product (GDP) will grow in the neighborhood of 3-1/2 percent over the course of 2010 as a whole and at a somewhat faster pace next year."
A) Consumer Spending "Consumer spending is likely to increase at a moderate pace going forward, supported by a gradual pickup in employment and income, greater consumer confidence, and some improvement in credit conditions."
B) Business Spending "posted another solid gain in the first quarter, and the increases were more broadly based than in late 2009; the available indicators point to continued strength in the second quarter."
C) Manufacturing Output "which has benefited from strong export demand, rose at an annual rate of 9 percent over the first four months of the year."
"At the same time, significant restraints on the pace of the recovery remain."
A) Housing Activity "Housing activity appears to have firmed only a little since mid-2009."
B) Nonresidential Buildings "Nonresidential buildings also is being held back by high vacancy rates, low property prices, and strained credit conditions."
C) Labor Market "we have begun to see some modest improvement recently in employment...however, a significant amount of time will be required to restore the nearly 8-1/2 million jobs that were lost over 2008 and 2009."
"recent data continue to show a subdued rate of increase in consumer prices."
Developments in Europe
"Nevertheless, history makes clear that failure to achieve fiscal sustainability will, over time, sap the nation’s economic vitality, reduce our living standards, and greatly increase the risk of economic and financial instability. Our nation’s fiscal position has deteriorated appreciably since the onset of the financial crisis and the recession."
Chairman Bernanke's statement is in line with the Fed Beige Book, which was also released the same day, June 9. A quick review of the Beige Book is here. "Moderate" is the theme in describing USA growth and expansion of economic activity and conditions. The USA economic recovery continues at a moderate pace, 2010 GDP is projected at +3.5%, and 2011 GDP will be at a "somewhat faster pace". The labor market has some "modest improvement" but a "significant amount of time" will be required to restore all the jobs lost. The Fed Beige Book noted the labor market "improved slightly" in the last 8 weeks. Inflation is a non-issue, the Fed is cooperating with Europe to "ensure stability and continued economic recovery", and the USA fiscal position has "deteriorated appreciably". There were no surprises in Chairman Bernanke's statement, which was carefully worded and cautiously optimistic.
Q&A with the Committee is for the Representatives to make statements and ask questions to score political points, further their own political agenda, promote the special interest groups that support them, create sound bites for the media and voters, and blame someone else, even Chairman Bernanke, for the USA economic problems and bankrupting of America because of their Congressional spending and lack of oversight. Much finger pointing and "I told you so" ensues afterwards from opponents of Bernanke and patting on the back and "I told you so" from the supporters of Bernanke. Regardless, Congress continues spending to ensure they are re-elected, the entitlements are provided to a vast proportion of the voters, and the special interest groups are given good service for the money they have paid to the Representatives. Therefore, no review of the Q&A is presented here. However, the Q&A is the entertainment portion of the session, which most people would find boring and dry otherwise. There is a reason economics has been called the "dismal science".
Federal Reserve System
The text of Chairman Bernanke's speech is here.
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