It’s true that the Federal Reserve faces a lot of political pressure and is unpopular in many circles.
BEN BERNANKEIt’s true that the Federal Reserve faces a lot of political pressure and is unpopular in many circles.
More Ben Bernanke Quotes
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September and October of 2008 was the worst financial crisis in global history, including the Great Depression.
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Although low inflation is generally good, inflation that is too low can pose risks to the economy – especially when the economy is struggling.
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It must be awfully frustrating to get a small raise at work and then have it all eaten by a higher cost of commuting.
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I and others were mistaken early on in saying that the subprime crisis would be contained. The causal relationship between the housing problem and the broad financial system was very complex and difficult to predict.
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We’ve never had a decline in house prices on a nationwide basis. So, what I think what is more likely is that house prices will slow, maybe stabilize, might slow consumption spending a bit. I don’t think it’s going to drive the economy too far from its full employment path, though.
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The crisis and recession have led to very low interest rates, it is true, but these events have also destroyed jobs, hamstrung economic growth and led to sharp declines in the values of many homes and businesses.
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The risk exists that, with aggregate demand exhibiting considerable momentum, output could overshoot its sustainable path, leading ultimately in the absence of countervailing monetary policy action to further upward pressure on inflation.
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Among the largest banks, the capital ratios remain good and I don’t expect any serious problems . . . . among the large, internationally active banks that make up a very substantial part of our banking system.
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The benefit of appointing a hawkish central banker is the increased inflation-fighting credibility that such an appointment brings.
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How much would you pay to avoid a second Depression?
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The best approach here, if at all possible, is to use supervisory and regulatory methods to restrain undue risk-taking and to make sure the system is resilient in case an asset-price bubble bursts in the future.
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Monetary policy cannot do much about long-run growth, all we can try to do is to try to smooth out periods where the economy is depressed because of lack of demand
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The lesson of history is that you do not get a sustained economic recovery as long as the financial system is in crisis.
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I am confident that we will meet whatever challenges the future may bring.
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Every effort needs to be made to try and offset the costs of Katrina and Rita by reductions in other government programs, especially those that are wasteful, duplicative and ineffective.
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