Under current law, on January 1, 2013, there’s going to be a massive fiscal cliff of large spending cuts and tax increases.
BEN BERNANKEUnder 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.
More Ben Bernanke Quotes
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The basic prescription for preventing deflation is therefore straightforward, at least in principle: Use monetary and fiscal policy as needed to support aggregate spending.
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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.
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Our mission, as set forth by the Congress is a critical one: to preserve price stability, to foster maximum sustainable growth in output and employment, and to promote a stable and efficient financial system that serves all Americans well and fairly.
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If I am confirmed, I am confident that my colleagues on the Federal Open Market Committee and I will maintain the focus on long-term price stability as monetary policy’s greatest contribution to general economic prosperity and maximum employment.
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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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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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I don’t see much evidence of an equity bubble.
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The impact on the broader economy and financial markets of the problems in the subprime markets seems likely to be contained.
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The Federal Reserve will not monetize the debt.
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Not all information is beneficial.
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The U.S. government has a technology, called a printing press (or, today, its electronic equivalent), that allows it to produce as many U.S. dollars as it wishes at essentially no cost.
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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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With respect to their safety, derivatives, for the most part, are traded among very sophisticated financial institutions and individuals who have considerable incentive to understand them and to use them properly.
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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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Although low inflation is generally good, inflation that is too low can pose risks to the economy – especially when the economy is struggling.
BEN BERNANKE