Bernanke to WSJ: US Unprepared for Next Recession
Wednesday, 19 Aug 2015 10:53 AM
Historically, the U.S. economy suffers a recession every five to eight years, so given that our recovery is more than six years old, we may face a downturn soon.
And with monetary policy already in heavy-easing mode and fiscal policy hamstrung by the government's massive debt burden, the government's tools to combat any downturn are limited.
"As the U.S. economic expansion ages and clouds gather overseas, policy makers worry about recession," write Wall Street Journal reporters Jon Hilsenrath and Nick Timiraos.
"Their concern isn’t that a downturn is imminent, but whether they will have firepower to fight back when one does arrive."
Former Fed Chairman Ben Bernanke is concerned too, though he's not panicking. The government's weapons to fight the next recession will be “more limited than usual, but they’re not zero by any means,” he told the paper.
The Federal Reserve's target rate for federal funds now stands at a record low of zero to 0.25 percent. And while the central bank is expected to start raising rates soon, many economists expect the rate to top out at 2 percent, and not until late 2016 or 2017.
On the fiscal side, federal government debt has soared to 74 percent of GDP from 39 percent in 2008. That leaves little room for higher spending and/or lower taxes.
"We have very little cushion for whoever the next president is and the next congressional leaders if they had to deal, gosh, with anything," Glenn Hubbard, dean of the Columbia Business School and an adviser to President George W. Bush, told The Journal.
Meanwhile, when it comes to the world economy, Ambrose Evans-Pritchard, international business editor of The (London) Telegraph, says leading indicators and money supply data indicate growth will rise in the months ahead, at least in the United States, Europe and China, says.
He cites research from Gabriel Stein of Oxford Economics showing that real global M3 money supply growth — based on the United States, China, The European Economic and Monetary Union, the United Kingdom, Japan and Canada — soared to a six-year high of 6.2 percent in June.
"The M3 gauge tends to lead economic growth by 12 months or so, suggesting that the worst may soon be over," Evans-Pritchard writes.
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© 2015 Newsmax Finance. All rights reserved.And with monetary policy already in heavy-easing mode and fiscal policy hamstrung by the government's massive debt burden, the government's tools to combat any downturn are limited.
"As the U.S. economic expansion ages and clouds gather overseas, policy makers worry about recession," write Wall Street Journal reporters Jon Hilsenrath and Nick Timiraos.
"Their concern isn’t that a downturn is imminent, but whether they will have firepower to fight back when one does arrive."
Former Fed Chairman Ben Bernanke is concerned too, though he's not panicking. The government's weapons to fight the next recession will be “more limited than usual, but they’re not zero by any means,” he told the paper.
The Federal Reserve's target rate for federal funds now stands at a record low of zero to 0.25 percent. And while the central bank is expected to start raising rates soon, many economists expect the rate to top out at 2 percent, and not until late 2016 or 2017.
On the fiscal side, federal government debt has soared to 74 percent of GDP from 39 percent in 2008. That leaves little room for higher spending and/or lower taxes.
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"We have very little cushion for whoever the next president is and the next congressional leaders if they had to deal, gosh, with anything," Glenn Hubbard, dean of the Columbia Business School and an adviser to President George W. Bush, told The Journal.
Meanwhile, when it comes to the world economy, Ambrose Evans-Pritchard, international business editor of The (London) Telegraph, says leading indicators and money supply data indicate growth will rise in the months ahead, at least in the United States, Europe and China, says.
He cites research from Gabriel Stein of Oxford Economics showing that real global M3 money supply growth — based on the United States, China, The European Economic and Monetary Union, the United Kingdom, Japan and Canada — soared to a six-year high of 6.2 percent in June.
"The M3 gauge tends to lead economic growth by 12 months or so, suggesting that the worst may soon be over," Evans-Pritchard writes.
Related Stories:
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