Ben Bernanke: Economic Recovery May Not Be Self-Sustaining, May Buy More Bonds Depending On Inflation

Tyler Durden's picture

Excerpts from the just starting interview with Ben Bernanke on 60 Minutes (via the WSJ):

Federal Reserve Chairman Ben Bernanke appeared Sunday evening on CBS’s “60 Minutes”
to discuss the state of the economy, the central bank’s controversial
$600 billion bond-buying plan and the financial crisis. Following are
excerpts from the interview with CBS’s Scott Pelley, as released by the
network:

Q: The major banks are racking up profits in the billions.
Wall Street bonuses are climbing back up to where they were. And yet,
lending to small businesses actually declined in the third quarter. Why
is that?

A: A lot of small businesses are not seeking credit, because, you
know, because their business is not doing well, because the economy is
slow. Others are not qualifying for credit, maybe because the value of
their property has gone down. But some also can’t meet the terms and
conditions that banks are setting.

Q: Is this a case of banks that were eager to take risks
that ruin the economy being now unwilling to take risks to support the
recovery?

A: We want them to take risks, but not excessive risks. we want to
go for a happy medium. And I think banks are back in the business of
lending. But they have not yet come back to the level of confidence
that –or overconfidence –that they had prior to the crisis. We want to
have an appropriate balance.

Q: What did you see that caused you to pull the trigger on the $600 billion, at this point?

A: It has to do with two aspects. the first is unemployment The
other concern I should mention is that inflation is very, very low,
which you think is a good thing and normally is a good thing. But we’re
getting awfully close to the range where prices would actually start
falling.

Q: Falling prices lead to falling wages. It lets the steam
out of the economy. And you start spiraling downward. … How great a
danger is that now?

A: I would say, at this point, because the Fed is acting, I would
say the risk is pretty low. But if the Fed did not act, then given how
much inflation has come down since the beginning of the recession, I
think it would be a more serious concern.
Q: Some people think the $600 billion is a terrible idea.
A: Well. I know some people think that but what they are doing is
they’re looking at some of the risks and uncertainties with doing this
policy action but what I think they’re not doing is looking at the risk
of not acting.

Q: Many people believe that could be highly inflationary. That it’s a dangerous thing to try

A: Well, this fear of inflation, I think is way overstated. we’ve
looked at it very, very carefully. We’ve analyzed it every which way.
One myth that’s out there is that what we’re doing is printing money.
We’re not printing money. The amount of currency in circulation is not
changing. The money supply is not changing in any significant way. What
we’re doing is lowering interest rates by buying treasury securities.
And by lowering interest rates, we hope to stimulate the economy to
grow faster. So, the trick is to find the appropriate moment when to
begin to unwind this policy. And that’s what we’re going to do.

Q: Is keeping inflation in check less of a priority for the Federal Reserve now?

A: No, absolutely not. What we’re trying to do is achieve a balance.
We’ve been very, very clear that we will not allow inflation to rise
above two percent or less.

Q: Can you act quickly enough to prevent inflation from getting out of control?

A: We could raise interest rates in 15 minutes if we have to. So,
there really is no problem with raising rates, tightening monetary
policy, slowing the economy, reducing inflation, at the appropriate
time. Now, that time is not now.

Q: You have what degree of confidence in your ability to control this?

A: One hundred percent.

Q: Do you anticipate a scenario in which you would commit to more than 600 billion?

A: Oh, it’s certainly possible. And again, it depends on the
efficacy of the program. It depends, on inflation. And finally it
depends on how the economy looks.

Q: How would you rate the likelihood of dipping into recession again?

A: It doesn’t seem likely that we’ll have a double dip recession.
And that’s because, among other things, some of the most cyclical parts
of the economy, like housing, for example, are already very weak. And
they can’t get much weaker. And so another decline is relatively
unlikely. Now, that being said, I think a very high unemployment rate
for a protracted period of time, which makes consumers, households less
confident, more worried about the future, I think that’s the primary
source of risk that we might have another slowdown in the economy.

Q: You seem to be saying that the recovery that we’re experiencing now is not self-sustaining.

A: It may not be. It’s very close to the border. — it takes about
two and a half percent growth just to keep unemployment stable. And
that’s about what we’re getting. We’re not very far from the level
where the economy is not self-sustaining.

Q: [On calls to cut the deficit]

A: We need to play close attention to the fact that we are
recovering now. We don’t want to take actions this year that will affect
this year’s spending and this year’s taxes in a way that will hurt the
recovery. That’s important. But that doesn’t stop us from thinking now
about the long term structural budget deficit. We’re looking at ten,
15, 20 years from now, a situation where almost the entire federal
budget will be spent on Medicare, Medicaid, Social Security, and
interest on the debt. There won’t be any money left for the military or
for any other services the government provides. We can only address
those issues if we think about them now.

Q: How concerned are you about the calls that you’re beginning to hear on Capitol Hill that would curb the Fed’s independence?

A: Well, the Fed’s independence is critical. The central bank needs
to be able to make policy without short term political concerns. In
order to do what’s best for the economy. We do all of our analysis, we
do all of our policy decisions based on what we think the economy
needs. Not based on when the election is or what political conditions
are.

Q: Is there anything that you wish you’d done differently over these last two and a half years or so?

A: Well, I wish I’d been omniscient and seen the crisis coming, the
way you asked me about, I didn’t, But it was a very, very difficult
situation. And– the Federal Reserve responded very aggressively, very
proactively
Q: How did the Fed miss the looming financial crisis?
A: there were large portions of the financial system that were not
adequately covered by the regulatory oversight. So, for example, AIG was
not overseen by the Fed. … The insurance company that required the
bailout, was not overseen by the Fed. It didn’t really have any real
oversight at that time. Neither did Lehman Brothers the company that
failed Now, I’m not saying the Fed should not have seen some of these
things. One of things that I most regret is that we weren’t strong
enough in in putting in consumer protections to try to cut down on the
subprime lending problem. That was an area where I think we could have
done more.

Q: The gap between rich and poor in this country has never
been greater. In fact, we have the biggest income disparity gap of any
industrialized country in the world. And I wonder where you think
that’s taking America.

A: Well, it’s a very bad development. It’s creating two societies.
And it’s based very much, I think, on– on educational differences The
unemployment rate we’ve been talking about. If you’re a college
graduate, unemployment is five percent. If you’re a high school
graduate, it’s ten percent or more. It’s a very big difference. It leads
to an unequal society and a society– which doesn’t have the cohesion
that– that we’d like to see.

Q: We have talked about how the next several years are going
be tough years in this country. But I wonder what you think about the
ten year time horizon. Fifteen years. How do things look to you long
term?

A: Long term, I have a lot of confidence in the United States. We
have an excellent record in terms of innovation. We have great
universities that are involved in technological change and progress. We
have an entrepreneurial culture, much more than almost any other
country. So, I think that in the longer term the United States will
retain its leading position in the world. But again, we gotta get
there. And we have some very difficult challenges over the next few
years.

Full interview below:

 

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David99's picture

Ben is a mad guy. Should be in the hospital for rest of his life.

VegasBob's picture

No, Bernokio is a shifty-eyed goddamn liar (with apologies to Harry S Truman, who used this terminology to describe Tricky Dick Nixon).  If his nose grew a foot for every lie he told in the interview excerpt, it would be dragging on the floor.

Bernokio is someone who should be tried for economic treason against the US, convicted, and hanged.  And plenty of other banksters should follow him to the gallows.

B9K9's picture

How can Ben be tried for treason since he was working under direct consent from the other 3 branches of government? When will people begin to realize that the USG was, and has always been, the central player in this saga?

Think 5, 10, 25, 100, 1,000 bankers stood to profit? Try 1, 2, 5 million federal, state & county employees, not to mention the massive welfare program known as the MIC. Wake up! This has always been about preserving the power in which the government had garnered on their own behalf for their own benefit.

But, remember, there isn't any reason to get all worked-up & emotional about these events; tyrannies require vast resources. But the 2nd law (entropy) dictates that diminishing returns doom all efforts. So just kick back and watch as nature bats clean-up.

There is no way to jump start the present economic model without some amazing new energy source. It isn't sufficient to merely have adequate fossil fuel resources for 50, 100,  250+ years. No, what we need is something that can handle a 5-10% CAGR ie that which would cover the Ponzi's accumulated debts. (Including $100+ trillion of promised, but unfunded, future benefits.)

Where is this amazing resource? Sorry, fellas, but it doesn't exist. Ben's little game, played on behalf of those so utterly dependent on his success, was simply a means of extending closing time until maybe a cute chick finally walked through the door.

anonnn's picture

...no way to jump start the present economic model without some amazing new energy source."...

Truth?

Unfairness begets chaos.

JLee2027's picture

Treason is treason. Doesn't matter who authorized it.

Minion's picture

I'm starting to wonder if Ben is regretting taking the job in the first place.  He's just a minion like all of us.  He's a front man for someone else.

cosmictrainwreck's picture

Oh, I have no doubt he regrets it, but probably got an offer he couldn't refuse...cleverly disguised as fame & fortune & the corridors of power. Poor bastard is stuck now, though, ain't he? Well, I guess he could quit, but sadly those wound as tight as he is usually blow their brains out.

UninterestedObserver's picture

Yup and if he is is right handed he will shoot himself with the left while drowning in a bathtub filled with an inch of water... damn suiciders

Herd Redirection Committee's picture

Zimbabwe Ben is a g*ddamn Psycho, is what he is.  He is worried about the dangers of 'not acting', what, like, bankruptcy?  Taking risks, and having those risks backfire should entail some kind of risk/reward.  If there is no risk (i.e. TBTF get bailed out) then we are rewarding failure!  This encourages fraud!  He will destroy the US dollar.  We just have to make sure that Ben and his cabal of friends ARE NOT the ones we allow to institute a new currency when this is all over!

A return to Sound Money!

Read our latest PsychoNews story: "Funny Money, Manic Markets, and Obsolete Media"

"Senator Bernie Sanders from Vermont delivered an amazing speech in the Senate on December 2nd that was right on the money in regards to the problems America (and by extension, the world) faces.

To quote:

"There is a war going on, and I'm not referring to the war in Iraq and Afghanistan"

"Against the disappearing and shrinking middle class of this country."

"Their [billionaires/Oligarchy] greed has no end"

"[there seems to be] very little concern for the people if it gets in the way of accumulating more and more power"

"top 1% of all earners earn 23% of all the income in this country"

"Exxon made $19 billion last year and paid $0 in taxes.  They got a refund..."
(12 minutes into video)

Sounds like Senator Bernie Sanders has been reading PsychoNews! 

http://psychonews.site90.net

Rider's picture

A hospital with bars you mean?

Thanatos's picture

You are right.

Can you see his facial ticks get going. His mouth quivering.

Those are the kind of responses you see from a person who knows its all over but has to "keep up appearances".

Thanks for the good stuff ZH.

Racer's picture

A: It doesn’t seem likely that we’ll have a double dip recession

Quote: Sub prime... well contained... NOT

RobotTrader's picture

The insufferable, condescending Bob Brinker is predicting spectacular stock market performance based on a 1 - 2 year extension of the Bush tax cuts.

Says the naysaying short sellers have been riding on Don Gibson's "Sea of Heartbreak"..

Interest rates remain at "rock bottom levels"..

LOL...

About 7 minutes into the broadcast...

http://vaca.bayradio.com/kgo_archives/01400.mp3

cosmictrainwreck's picture

Robo - you're getting cryptic on me - I'm getting confused! What do I dooo? Oh, lawdy, what do i dooo?

Hulk's picture

Bob gave great advice and led many to the land of "critical mass" in normal times, but he is a bit lost now, crisis of 08 caught him completely by surprise...

But he is essentially telling folks the same thing you tell them, which is don't fight the fed, which is good advice...

billhilly's picture

Hey Robut, where are those futures charts(posted so gloriously on an earlier thread) NOW?

Miles Kendig's picture

All the more reason to go long COH & GUCG :)

Dr o love's picture

This is the same Mr. Brinker that was bullish all the way from S&P 1550 to 666.  ALL the way down.

scatterbrains's picture

Did I miss the part where he suggested he may have to do more ?

 

asteroids's picture

I thought Ben was going to cry or piss his pants. His lips were trembling. For a man 100% confident... Nice suit though.

Jones79's picture

i thought he looked a lot worse during the first 60 minutes interview.  more composed this time but not wholly confidence-inspiring despite his 100% level.

Whats that smell's picture

I noticed that also. He did not have a very strong demeanor.

 

Anyone else see this?

 

http://www.youtube.com/watch?v=2N8gJSMoOJc&feature=player_embedded

trillionaire's picture

I didn't pay much attention to what he was saying because I knew I would be able to read / view it again later.  I paid attention to his appearance and mannerisms and I am very scared.  His lips were quivering, he stuttered on saying "inflation" (I think) and his hair and beard were trimmed to perfection, a well polished turd indeed.

rosiescenario's picture

Hope the public tunes in and realizes this guy is clueless...

samseau's picture

So wait...

"a recovery that isn't self-sustaining"

let me think about this, in terms of logic....

*looks up what a double-negative is*

hmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmm

 

 

isn't a recovery that isn't self-sustaining just doublespeak for

 

"not recovering"?

LeBalance's picture

Attempt at logical conclusion detected!

Sending MIB team and Rendition Team ASAP!

ETA 20 minutes.

Glad we caught that one!

Miles Kendig's picture

An observable absence of absence doesn't quantify an absolute absence of absence, or an implied absence of near or medium term moderation of absence absent quantifiable or qualifiable absenceism - Jean-Claude Trichet's notes on his planned 60 minutes interview

This absence of logic simply cannot be equaled, let alone bettered.  So let not his absence of sense be questioned...

Cheers Hedgie & make sure that MIB helicopter is a sky crane for that flying long short bus pick up in Brussels

http://www.youtube.com/watch?v=6QX7F72FT1c

CheapKUNGFU's picture

errrr, ummm, a negative X (times) a negative is surely a positve

havent you been practicing your CAPTCHA math?

Even Robo has figured that equation out

Shameful's picture

I'll give it to Ben he sure is not afraid to go into public and tell whoppers.  Unemployment is education based?  Tell that to the college kids with student loans and no jobs.  Buying securities is not money printing,then why not buy ALL Treasuries issued? Hell he probably will at some point and self reference this interview.

I guess can't be surprised.  Man lies under oath in Congress and gets away with it, so why the hell not!

Caviar Emptor's picture

Hehe. He was using that to skirt the question about income disparity. He didn't want to talk about 'Trickle Down'.

Phineas Gage's picture

Exactly.  I expected soft journalism, but that was absurd.

Bastiat's picture

Only "trickle down" happening involves Bennie's pantleg . . . and it ain't nothin nice.

Caviar Emptor's picture

Right! He won't take any responsibility for the effects of his policy. That's all Congress's headaches. I just print the bills and count de money, man. 

Phineas Gage's picture

When I heard his response to the income disparity question I got annoyed.  The appropriate rebuttal to the dodge should have been "I didn't ask you about unemployment, I asked you about income disparity.  Aren't your policies benefiting a small percentage of the population disproportionately?"

SRV - ES339's picture

That would be journalism... there is a law against that now, isn't there!

ViewfromUndertheBridge's picture

Well, calls for assassination are maybe not the law but...

DarkMath's picture

"Unemployment is education based?"

Translation: If you're a blue collar worker who relied on any sort of domestic manufacturing then Ben Bernanke wishes you would just die already and take yourself out of the gene pool because you're not supposed to still be here now goddamit. All you factory workers should have gotten your degrees of the University of Phoenix online and invented a new Facebook app already. Fuck you if you didn't. It's not Ben Bernanke's fault your can't feed your family anymore. Sorry.

"Buying securities is not money printing"

This one really confused me. He seems to still be stuck on the previous QE where they just increased bank reserves which technically didn't show up in M2. But not anymore. Every dollar he buys of US Treasuries show up in M2. Right? I mean he creates money out of thin air, buys US Treasury Debt and allows the production of Food Stamps which can be taken down to the Walmart to purchase real goods. Am I right here? What am I missing. Did Ben Bernanke just fucking lie on national television?

 

 

bob_dabolina's picture

He didn't "lie"

He didn't "print" the money he "created" the money by adding numbers digitally here and there. 

 

dbach's picture

lol exactly! that bugged me too. benny's arguing semantics there. the reporter should have asked where did those $600B come from? they need to do a follow up report where we can send in questions for them to ask the bankster.

merehuman's picture

Any bartender would have done a better interview with or without the barnacle

Captain Benny's picture

I know a person holding a > $200k jobs without a college education.  Lets call him Oddball.  Well Mr Oddball says that you can't look at simple statistics to determine the ability for one to succeed in business.  Many of those that do not attend college and graduate are not because they are uneducated, instead it is because they may be uneducatable.  Or they may have financial problems preventing a college education.  Or they may have family situations that require more attention (think mentally ill sibling) than what they'd be able to do when attending college.

Mr Oddball had no reason not to finish college.  He just decided that it wasn't right for him and went on his marry way doing other things in life and striving for what he wanted to accomplish. What does Mr Oddball think about Ben Bernanke's comment?

"Bullshit.  The guy is a clear psychopath with no grasp on the basic statistics of formal education and employment.  He should assign some of the statistical turds down on Maiden Lane to write a paper with a really complex title revealing how ignorant he is.  But psychopaths don't use logic to make decisions."

Shameful's picture

My best friend makes a great living without a degree, because he has a marketable skill. He routinely busts on me for not making as much as him even thought I got my "education" at a sanctioned American school.

Ben is dancing. My take away on that phrase is "Go back to school and take on student loan debt". Problem is everyone graduates eventually or amass so much debt that even Uncle Sugar thinks you are a bad risk. Again I know people 200k+ in for student loans without any real job prospects. Might come out and be lucky to get 30k a year.

dantes1807's picture

The whole problem with Ben Bernanke and the banks is that banks should not be taking risks. Prudent underwriting means good collateral, borrower's equity, and personal liability against the borrower. Bankers were happy to play games before because they didn't get stuck with the hot potato. Now that they are being forced to take on underwriting risk, they are not going to make these poor loans.

Billy Shears's picture

Yeah it seems now that the moral hazard issue is no longer academic and TBTF has been enshrined by the Fed and the Feds they have cold feet and want to take their ball home. Crazy banksters!