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Home Publications Blogs Beat the Press Background to Assess Ben Bernanke's Warning On the Fiscal Standoff and The Budget

Background to Assess Ben Bernanke's Warning On the Fiscal Standoff and The Budget

Tuesday, 20 November 2012 15:44

The Washington Post gave a careful account of Federal Reserve Board Chairman Ben Bernanke's testimony to Congress:

"Federal Reserve Chairman Ben Bernanke delivered a stark warning to lawmakers in a high-profile speech Tuesday, saying that the U.S. economy is at risk if they bungle negotiations over the looming austerity crisis.

"Bernanke’s remarks are notable less for their substance than for their tone and timing. In his most prominent public speech in almost three months, Bernanke made clear that he sees grave risks should the bargaining over the 'fiscal cliff' — a phrase he coined — lead to either steep, immediate fiscal austerity or prolonged, confidence-rattling brinksmanship. And he suggested that 2013 could be a good year for the U.S. economy if lawmakers reach a deal quickly and amicably. ...

"And the nation’s future prospects may be shaped in part by whether policymakers act in ways that instill confidence in the stability of U.S. policy.

"The economy is already bearing the weight of that anxiety, Bernanke said, and 'such uncertainties will only be increased by discord and delay. In contrast, cooperation and creativity to deliver fiscal clarity . . .  could help make the new year a very good one for the American economy.'"

It would probably be worth reminding readers that as a Federal Reserve Board governor and later President Bush's chief economic adviser, Mr. Bernanke completely missed the rise of the $8 trillion housing bubble, the largest asset bubble in the history of the world. When its collapse first started to create stress in financial markets, he publicly stated that he expected the problems to be restricted to the subprime market. When Bears Stearns collapsed in March of 2008 he testified to Congress that he didn't see another Bear Stearns out there.

It might be useful to give readers this background on Bernanke's track record when reporting his current statements on the economy.

Comments (4)Add Comment
Words, words
written by Bart, November 20, 2012 4:23

What is with this new term, "Austerity Crisis"?? Is it meant to deflect attention away from some other way to present the budgetary wrangling?

Would Austerity cause a crisis, or is it meant we have a lack thereof?
written by JSeydl, November 20, 2012 4:44
In addition, Bloomberg let Greenspan spew the same nonsense the other day: http://www.bloomberg.com/video...3ySQ.html.

It's pretty incredible when you think about it. They are both directly responsible for the suffering of tens of millions of workers, yet the media still sees them as economic gods.

Actually, maybe they are precisely the gods who have been instilling so much misinformation into Samuelson's mind. That would explain a lot.
written by Jim Scribner, November 20, 2012 8:18
Sometimes you have to call B.S. My 1932 Webster dictionary's definition of austerity is: severity of manner or life. It's time for that to go away.
parallel universe
written by frankenduf, November 21, 2012 8:21
bernanke also misapprehends a natural law of the universe by hoping for lawmakers to reach a deal "amicably"- heh- the only time that's ever happened is when agreeing to bomb brown people (not sure how many brown congress members there are...)

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About Beat the Press

Dean Baker is co-director of the Center for Economic and Policy Research in Washington, D.C. He is the author of several books, his latest being The End of Loser Liberalism: Making Markets Progressive. Read more about Dean.