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Friday, November 19, 2010

Bernanke's Speech Today Attention Should Be Paid

Much attention is correctly being paid to Ben Bernanke's speech in Germany this morning. It's worth reading the full text on the fed's website which includes the graphs.  No Greenspan type doublespeak here. He pulled no punches in calling for surplus countries to allow their currencies to appreciate to reflect their massive trade surpluses (with china at the head of the pack). Most of the analysis is being devoted to the currency issues. But I found this comment, which seems to have received less attention, even more interesting

In sum, on its current economic trajectory the United States runs the risk of seeing millions of workers unemployed or underemployed for many years. As a society, we should find that outcome unacceptable. Monetary policy is working in support of both economic recovery and price stability, but there are limits to what can be achieved by the central bank alone. The Federal Reserve is nonpartisan and does not make recommendations regarding specific tax and spending programs. However, in general terms, a fiscal program that combines near-term measures to enhance growth with strong, confidence-inducing steps to reduce longer-term structural deficits would be an important complement to the policies of the Federal Reserve.

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