Extraordinary Times call for Extraordinary Measures

Recently in the news was the interview of Ben Bernanke, his comments on our current economy, and of what the future economy will look like. He is currently in defense of the Fed's effort to try and contain the economic crisis and is devoted to do whatever it takes to get out of this "downward spiral". During the interview of Ben Bernanke at the National Press Club, the first time a Federal Reserve Chairman has ever spoken to journalists, he tried to lessen the concern of the dangers of printing all the money they had recently printed by backing the Fed's and expressing his trust in them to do a good job and said: “The Federal Reserve has done, and will continue to do, everything possible within the limits of its authority to assist in restoring our nation to financial stability,” (New York Times). He also focused on the rate of unemployment and how it would for sure rise this year (now at 8.1%, up from last months 7.6%). Even after these statement were said, the central bank gave a report on how the Federal Reserve "had become considerably more pessimistic" (New York Times) about our unemployment rate, which could be even higher than predicted. The Federal Reserve also came out with its predictions on economic growth for the next five years and said that it would rise about "2.5 to 2.7 percent anually" (New York Times). Another major issue Bernanke focused on was the government spending that has gone from $900 billion last September to approximately $2 trillion this year. This spending was issued to help the Financial System and improve the economy with new programs that it will issue and will hopefully not fuel inflation to rise or lose money from these risky loans.

My opinion on this matter is that Ben Bernanke has been hit with a hard and difficult crises and has a lot on his hands right now. I believe this economic crises will take a lot of work to overcome and will be a slow process to heal at best. I also think these economic recovery plans and programs will eventually work with a lot of the money being poured into them. With this government spending it will hopefully reduce unemployment and act as an Expansionary fiscal policy. This expansionary effect with a bit of luck will fuel our economy, lower taxes, and increase our demand. With the 3 basic tools our Fed uses, it would decrease the reserve requirement, decrease the discount rate, and buy more securities, so that the economy, with the increase in money supply, will soon decrease our interests rates and increase investment. Well, times call for extraordinary measures, and this is certainly one of them.


http://www.nytimes.com/2009/02/19/business/economy/19fed.html