Fed Chairman Ben Bernanke is spoke today in a speech to the Economic Club of New York which gives the bulls and the bears plenty of ammunition to support their ongoing cases.
Bernanke told the audience that the economy will continue to grow in 2010, but he also noted that the underlying economic strength should support the US Dollar. The sad notion here is that Bernanke is effectively talking about a jobless recovery, or at least one where unemployment will remain high.
Bernanke’s notion of the recovery is hindered by the fact that credit remains tight and is expected to for some time, yet he noted that it takes about 2.5% GDP growth to create the 100,000 jobs required each month just to absorb the new entrants on the job market.
Bernanke also noted asset bubbles, and said he does not see any new asset bubbles in the economy today. On that notion, he noted that inflation still remain subdued for some time. And along the same notion, he reiterated that the FOMC sees low rates for an extended period.
On the banking system, Bernanke feels that too-big-to-fail is a critical issue. He does not want any single institution to be able to take down the system. What is interesting is that he did not say that smaller banks were the answer to this, but broader and proper regulation is the answer.
The only real new issue here is that Bernanke did address our deficits as noting that the current deficits are unsustainable. He thinks the government needs to lay out a plan for sustainable deficits.
We were hoping to hear some new key insight, but today was not any new revelation.
JON C. OGG
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