“Ever since the Great Depression, economists have known that demand shortages tend to persist in the wake of severe financial crises like the ones that happened in 1929 and 2008.”

Every group spends more when its income grows.

Prescriptive regulations, such as telling electric utilities what kinds of coal to burn or what kinds of scrubbers to install on their smokestacks, were not only intrusive, they were also grossly inefficient.

In almost every instance, air and water quality goals were met more cheaply and quickly when we taxed pollution than when we tried to regulate it directly.

Physical pain is a fact that comes with living, just as illness or financial woes or broken relationships are facts. But misery is a state of mind, a reaction to the facts, that can be controlled or altered by an act of will.

The financial crisis appears to be mostly behind us, and the economy seems to have stabilized and is expanding again.

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.

We do not expect significant spillovers from the subprime market to the rest of the economy or to the financial system.

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.

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.

The impact on the broader economy and financial markets of the problems in the subprime markets seems likely to be contained.

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.