Washington - Arabstoday
Federal Reserve Chairman Ben S Bernanke said the US is facing a crisis with a jobless rate at or above 9 per cent since April 2009, and that fiscal discipline would help spur the economic recovery. “This unemployment situation we have, the jobs situation, is really a national crisis,” Bernanke said in response to questions after a speech in Cleveland. “We’ve had close to 10 per cent unemployment now for a number of years and, of the people who are unemployed, about 45 per cent have been unemployed for six months or more. This is unheard of.” The chairman is contending with the most opposition the Federal Open Market Committee in almost 19 years, with three policy makers opposing the central bank’s decision last week to push down longer-term interest rates. Fed regional bank presidents Thomas Hoenig of Kansas City and Richard Fisher of Dallas spoke out against the plan this week, while Eric Rosengren of Boston backed it and Dennis Lockhart of Atlanta said the move will probably have a “modest” effect. The speech was Bernanke’s first since the Fed announced on Sept.21 that it would replace $400 billion of short-term debt in its portfolio with longer-term Treasuries in an effort to further reduce borrowing costs and strengthen the flagging economy. US growth has stalled even as the Fed purchased $2.3 trillion in assets in two rounds of quantitative easing and held interest rates near zero since December 2008. “Monetary policy is not a panacea,” Bernanke said. “There are certainly some areas where other policy makers could contribute,” and “strong housing policies to help the housing markets recover would certainly be useful.” The US should learn from the success of many emerging market economies and support strong economic growth through “disciplined fiscal policies,” Bernanke said in his speech. He didn’t address the outlook for the US economy or monetary policy in his remarks on “Lessons from Emerging Market Economies on the Sources of Sustained Growth.” The experience of emerging markets shows “the need to encourage private capital formation while undertaking necessary public investments,” Bernanke said. He also cited open trade, investment in education, technological advances and a regulatory framework that “encourages entrepreneurship and innovation while maintaining financial stability.” Bernanke’s speech reviewed the recommendations of John Williamson, an economist and senior fellow at the Peterson Institute for International Economics, a set of guidelines known as the Washington Consensus. During the US recession from December 2007 to June 2009, the BRIC nations of Brazil, Russia, India and China became the engines of the global economy, with Chinese gross domestic product expanding 7.9 per cent even as the US was still contracting. While emerging countries produced about 85 per cent of global economic growth since then, China, India and Brazil are slowing after they lifted interest rates to curb inflation following at least $870 billion of fiscal stimulus during the financial crisis.