Economic Outlook: Bernanke's Meeting with National Press Club

Bernanke is the Chairman of the US Federal Reserve Board. This meeting between Bernanke and the National Press Club started with a report by Bernanke about the economic outlook and the actions taken by the Federal Reserve and Treasury Department. This article includes what Bernanke stated in his report and in his answers to questions.

Bernanke predicted that the economy will grow rapidly in 2011, but jobs will lag behind. primarily because of the uncertainty of demand.

The early recovery was due to the stabilization of the financial market. A 4% increase in spending was reported during the fourth quarter of 2010.

For the year of 2010 the inflation rate was 1%. Bernanke also mentioned that the core inflation rate was 0.7%. Wage growth was 1.8%.

Business investments increased in 2010.

Employers are reluctant to hire new workers. Uncertainty of future demands affects jobs. Unemployment has remained stubbornly high. It was estimated that 45% of the unemployed have been unemployed for more than six months. The economy must grow at an annual rate of 2% just to keep the unemployment rate from rising. This gives the reader a measure of the gravity of the situation.

The availability of loans have resulted in a slight improvement of the job market. This is fine for business and personal loans. But a significant number mortgage principles are still higher than the home values.

The federal reserve has eased fund rates by purchasing mortgage backed securities. Recently these mortgage backed securities have been replaced by Treasury securities. The net effect was adding more funds for the banks. It also had the effect of reducing borrowing costs and raising asset prices. It has the effect of increasing spending and easing financial credit.Yields on treasury securities have risen and the Financial markets have responded favorably. The current stock market high is partially attributed to the actions by the Federal Reserve Board.

The Federal debt is currently at 9% of GDP. Congress must enact changes in fiscal policy.

The aging of the population and the rising costs of health care also affect the Federal debt. The ratio of older people to younger people is 5 to 1 because of the baby boom and this adds a huge financial burden via medicare, medicaid and Social Security. This is in additional to the financial burden on entitlement programs due to more and more people falling below the poverty line. We have enough resources to find solutions without destroying our social safety network and without drastically increasing revenues.

Reductions in spending and increased government revenues are necessary to reduce our deficit without laying the complete burden on the poor and disabled. The increase in revenues can come from a complete overhaul of our tax system that drastically reduces corporate taxes making our corporations more competitive in the global market.

The Federal Reserve has limited resources to pay the interest on the national debt. If Congress does not extend the debt limits in 2011, their action could threaten our ability to pay interest on our national debt. Defaulting on interest payments would have detrimental effects on our overall economy. It would be the equivalent of reducing our credit rating. The Republicans are making a mistake in their promise not to extent debt limits.

Some members of Congress are advocating that the GAO provide Congress provide periodic analysis of the Federal Reserve monetary policy. This is fine as long as it does not lead to political decisions of monetary policy. Political issues should not direct our economic policy. This would be as disastrous as a politician dictating the detailed strategy of our war in Afghanistan. It is important the the Federal Reserve Board remain independent of politics.

My personal opinion:

I think Bernanke presented an excellent report. I advocate periodic press meetings to keep the public informed about the current state of our economy. Sadly, I think Republican Congress members have a primary focus on the 2012 elections instead of on our economic woes. If the Republicans succeed in destroying the independence of our government agencies and cripple those agencies via political issues, it will be disastrous for our nation.

I use the word Obamacare not in the negative sense but to clearly indicate that Obama deserves much credit for boldly trying to resolve the health care issues. At least Obama attacked the issue head on. The Republican amendments were rejected because they contained efforts to destroy Obamacare and not because of any attempt to lock the Republicans out.

There are many areas of Obamacare that needs improvement. The bill repealing Obamacare should have included a Republican alternative to Obamacare. The irony is that a new Health Reform bill replacing Obamacare would stand a much better chance of being signed into law.

I think that inflation will become a threat to our economic recovery especially when the low prices of products rise to the levels they were at before the recession. The other major threat is the unstable real estate market that may be hurt via future foreclosures. The inability to pay interest on our debt via a debt limit imposed purely for 2012 campaign purposes would be detrimental to our economy. And I also agree that our Federal Agencies policies should not be subject to Congressional politics.