Unfazed by critic, the Chairman of the Federal Reserve Ben Bernanke said that more federal action is the call of the hour considering the weak state of the economy; definitely not less. Speaking over a televised interview he said that the most important threat to the economy is persisting high unemployment and not inflation; this opens up the possibility of US sliding back into recession again. He strongly defended the measures his department had taken, last Sunday on CBS “60 Minutes”. He said, “We’re not far from the level where the economy is not self-sustaining”. He said that in reality it was “close to the border”. An annual 2.5% growth rate is essential to keep the unemployment rate (that is already high) from becoming worse.
Bernanke took this opportunity to refute critics who were vociferous about the plans of the Federal Reserve to purchase back bonds worth about $600 billion. He insisted that this infusion of dollars into the economy was essential to bring back confidence.
Some pundits do not agree considering that stabilization signs are coming through and that the growth rate is improving. Others opine that this move could lead to inflation and make things even tougher for the Federal Reserve to come up with an “exit strategy” from the extraordinary steps it had to take recourse to give support to the sagging economy at the hour of crisis.
Since the time of the announcement of purchase of bonds, investors have caused the pushing up of gold prices. They want to cling on to gold as a hedge against increased inflation risks.
The rate of unemployment increased last November to 9.8% despite addition of 39,000 jobs in that month. This data seemed to prove the point Bernanke has been trying to impress. He said that there is the certain possibility of the Federal Reserve expanding its plan of purchasing bonds over the targeted $600 billion during the forthcoming six months or so if the economic conditions demanded so.
Many stock investors felt reassured by the message. It meant the Federal Reserve would not permit the economy to slide down at a time when the debt crisis in Europe was getting critical. However Bernanke presented a gloomy picture which was not cheering to the stock market. Bernanke added, “At the rate we’re going it could be four, five years before we are back to a more normal unemployment rate; somewhere in the vicinity of say 5% to 6%”.
Julie Thompson, has been working on ForeclosureDataOnline.com studying the foreclosures market, helping buyers on the finer points of Glendale foreclosed homes for sale.