Bernanke speech … my observations

Today in Washington, D.C. Fed Chairman Ben Bernanke gave a speech on the economic outlook and macroeconomic policy. Below are my observations from that speech:

  • recovery appears to be strengthening – but not enough to bring the level of job creation necessary
  • recovery is shifting into self-sustaining mode (out of gov’t stimulus mode)
  • housing sector remains terrible
  • expects stronger growth in 2011 than 2010
  • need SUSTAINED period of strong job growth to believe in the recovery
  • everyone knows there is commodity inflation. overall inflation is extremely low. wage growth is slow and average hourly earnings up slightly. Plenty of slack in economy = no real inflation concerns.
  • if rates were not at zero – we would lower them.
  • it is easy for the FOMC to raise rates regardless of balance sheet size now that we can pay interest on reserves. we also have many new tools to drain reserves from the system when necessary.
  • serious, substantial, structural issues in the long-term fiscal budget should addressed. these are primarily: aging population and rising health care costs

“If something cannot go on forever, it will stop.” – Herbert Stein  … in reference to the unsustainable path of deficits and debt.

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