Monday, December 6, 2010
Bernanke on 60 Minutes, and Daily Show Response
An interview with Ben Bernanke, the Chairman of the Fed, aired this Sunday December 5th, 2010 on 60 Minutes. Bernanke endorsed making plans now to rein in the deficit in the long term, but not to start implementing those plans until the recovery is more secure. Bernanke discusses how an immediate drop in government expenditure or increase in taxes would further dampen the economy (from class: shift AD left) leading to more unemployment.
Bernanke estimated it could take 4 or 5 years until unemployment returns to 5 to 6%. He did not use the term natural rate of unemployment, but that is what he appeared to mean. Bernanke expressed concerns about the ability of the long term unemployed to find jobs again. Perhaps concerns about the long term unemployed explain why he suggests our new natural rate of unemployment is higher than it was before the "Great Recession" (previous consensus was about 4.5 to 5%).
The Daily Show (Jon Stewart) has fun with a Bernanke verbal fumble in this interview. The credit for this link goes to a commenter (thank you). Bernanke appears to contradict his earlier explanation of quantitative easing (QE). QE is the name for the Fed policy of buying financial assets with electronically created money to stimulate the economy and/or support key financial institutions.
at 1:27 PM