Sunday, August 28, 2011

Fed Chairman Bernanke's comments at Jackson Hole

Last Friday, U.S. Federal Reserve Chairman Ben Bernanke provided a widely anticipated speech at the Jackson Hole Economic Policy Symposium, an event where policy experts and academics annually gather to exchange views on emerging issues and trends. Below are selected excerpts from the speech - the complete text is at http://www.federalreserve.gov/newsevents/speech/bernanke20110826a.htm.

ON GROWTH CHALLENGES IN THE U.S.
“Our population is aging, like those of many other advanced economies, and our society will have to adapt over time to an older workforce. Our K-12 educational system, despite considerable strengths, poorly serves a substantial portion of our population. The costs of health care in the United States are the highest in the world, without fully commensurate results in terms of health outcomes.”

ON THE DEBT-CEILING DEBACLE
“the country would be well served by a better process for making fiscal decisions. The negotiations that took place over the summer disrupted financial markets and probably the economy as well, and similar events in the future could, over time, seriously jeopardize the willingness of investors around the world to hold U.S. financial assets or to make direct investments in job-creating U.S. businesses.”

ON THE NEED FOR WASHINGTON TO LEAD
“The quality of economic policymaking in the United States will heavily influence the nation's longer-term prospects. To allow the economy to grow at its full potential, policymakers must work to promote macroeconomic and financial stability; adopt effective tax, trade, and regulatory policies; foster the development of a skilled workforce; encourage productive investment, both private and public; and provide appropriate support for research and development and for the adoption of new technologies.

MY TAKE: The problems in the U.S. are well documented, but the road ahead remains unclear. While Chairman Bernanke also indicated that the Fed has additional tools to stabilize the economy, members of the Fed are divided on what actions to take (investors are hoping for more stimulus). Additionally, the ability for the current U.S. Congress and the President to address the hardest challenges of a generation is still a poorly executed work in progress. Investing involves assessing probable outcomes while navigating future uncertainties – coherent political leadership could reduce the uncertainty.

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