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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

Ben Bernanke

The basic prescription for preventing deflation is therefore straightforward, at least in principle: Use monetary and fiscal policy as needed to support aggregate spending.
BEN BERNANKE

Business Principle Support
In the future, my communications with the public and with the markets will be entirely through regular and formal channels.
BEN BERNANKE

Communication Formal
The sources of deflation are not a mystery. Deflation is in almost all cases a side effect of a collapse of aggregate demand.. a drop in spending so severe that producers must cut prices on an ongoing basis in order to find buyers.
BEN BERNANKE

Cutting Ongoing Order
The more important reason is that the research itself provides an important long-run perspective on the issues that we face on a day-to-day basis.
BEN BERNANKE

Issues Perspective Running
I served seven years as the chair of the Princeton economics department where I had responsibility for major policy decisions, such as whether to serve bagels or doughnuts at the department coffee hour.
BEN BERNANKE

Coffee Responsibility Years
The lesson of history is that you do not get a sustained economic recovery as long as the financial system is in crisis.
BEN BERNANKE

Lessons Long Recovery
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.
BEN BERNANKE

Committee Country Moving
One might as well try to perform brain surgery with a sledgehammer.
BEN BERNANKE

Brain might Trying
So it’s important, as it affects overall levels of production and employment in the U.S. There are many domestic industries doing well in the United States, notwithstanding a strong dollar.
BEN BERNANKE

Country Dollar Employment Overall Strong
Achieving price stability is not only important in itself, it is also central to attaining the Federal Reserve’s other mandate objectives of maximum sustainable employment and moderate long-term interest rates.
BEN BERNANKE

Employment Important Long
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.
BEN BERNANKE

Depression Financial Great Result
The impact on the broader economy and financial markets of the problems in the subprime markets seems likely to be contained.
BEN BERNANKE

Financial Impact Problem
Nobody likes to fail but failure is an essential part of life and of learning. If your uniform isn’t dirty, you haven’t been in the game.
BEN BERNANKE

Dirty Essential Games
If you want to understand geology, study earthquakes. If you want to understand the economy, study the Depression.
BEN BERNANKE

Depression Earthquake Want
The crisis in Europe has affected the US economy by acting as a drag on our exports, weighing on business and consumer confidence and pressuring US financial markets and institutions.
BEN BERNANKE

Acting Country Financial Lace
In a manner as nearly consistent as possible with full utilization of economic resources and low and stable inflation. In other words, the best way to get out of trouble is not to get into it in the first place.
BEN BERNANKE

Best Economic Inflation Resources Way
How much would you pay to avoid a second Depression?
BEN BERNANKE

Borrow Depression Great Pay
The central bank needs to be able to make policy without short term political concerns.
BEN BERNANKE

Able Needs Political
House prices have risen by nearly 25 percent over the past two years. Although speculative activity has increased in some areas, at a national level these price increases largely reflect strong economic fundamentals.
BEN BERNANKE

Fundamental Past Strong Years
I assure this committee that, if I am confirmed, I will be strictly independent of all political influences… essential to that institution’s ability to function effectively and achieve its mandated objectives.
BEN BERNANKE

Essentials Independent Political
Nobody really understands gold prices and I don’t pretend to understand them either.
BEN BERNANKE

Gold Gold Price
Both humanity’s capacity to innovate and the incentives to innovate are greater today than at any other time in history.
BEN BERNANKE

Humanity Incentives Today
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

Growth Home Jobs
Indeed, in general, healthy investment returns cannot be sustained in a weak economy, and of course it is difficult to save for retirement or other goals without the income from a job.
BEN BERNANKE

Goal Job Retirement
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.
BEN BERNANKE

Imagination Thinking Years
The more guidance a central bank can provide the public about how policy is likely to evolve the greater the chance that market participants will make appropriate inferences.
BEN BERNANKE

Chance Guidance Inference
If you are not happy with yourself, even the loftiest achievements won’t bring you much satisfaction.
BEN BERNANKE

Achievement Not Happy Satisfaction

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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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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