We do not expect significant spillovers from the subprime market to the rest of the economy or to the financial system.
BEN BERNANKEWeaker currencies abroad mean a strong dollar, and a stronger dollar, together with a weak global environment, is a drag on the U.S. econom.
More Ben Bernanke Quotes
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The amount of currency in circulation is not changing. The money supply is not changing in any significant way.
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Under a cold turkey strategy, at each policy meeting the Federal Open Market Committee would make its best guess about where it ultimately wants the funds rate to be and would move to that rate in a single step.
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A money-financed tax cut is essentially equivalent to Milton Friedman’s famous ‘helicopter drop’ of money.
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Life is amazingly unpredictable; any 22-year-old who thinks they know where they will be in 10 years, much less in 30, is simply lacking imagination.
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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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Over the years, the U.S. economy has shown a remarkable ability to absorb shocks of all kinds, to recover, and to continue to grow.
BEN BERNANKE -
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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A collapse in U.S. stock prices certainly would cause a lot of white knuckles on Wall Street. But what effect would it have on the broader U.S. economy? If Wall Street crashes, does Main Street follow? Not necessarily.
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Importantly, in the 1930s, in the Great Depression, the Federal Reserve, despite its mandate, was quite passive and, as a result, financial crisis became very severe, lasted essentially from 1929 to 1933.
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Investment banks manage to go bankrupt through their investment-banking activities, commercial banks manage to go bankrupt through their commercial-banking activities.
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Economics is a highly sophisticated field of thought that is superb at explaining to policymakers precisely why the choices they made in the past were wrong. About the future, not so much.
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Speaking as somebody who has been happily married for 35 years, I can’t imagine any choice more consequential for a lifelong journey than the choice of a traveling companion.
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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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One might as well try to perform brain surgery with a sledgehammer.
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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.
BEN BERNANKE