Bernanke Defends U.S. In Speech To European Bankers
STEVE INSKEEP, host:
Let's get some analysis now, today's speech by Federal Reserve chairman, Ben Bernanke. He is defending the Fed from criticism at home and abroad.
David Wessel of The Wall Street Journal wrote a book about the Fed. He joins as he often does. David, good morning.
Mr. DAVID WESSEL (Journalist, The Wall Street Journal; Author, In Fed We Trust: Ben Bernanke's War on the Great Panic): Good morning.
INSKEEP: I should mention this grows out of the Fed's decision to buy $600 billion in Treasury bonds, pump a lot more money into the economy. Who's been critical of that?
Mr. WESSEL: Pretty much everybody from Sarah Palin to the Chinese central bank to the Republican leadership of Congress.
INSKEEP: And everybody's got their reasons. The Chinese are unhappy about the value of the dollar changing. Why are people unhappy at home?
Mr. WESSEL: I think that there's a lack of confidence in the Fed's ability to actually pull this off. Its friends say it has a modest chance of working and doing a little good for its economy. Its foes say that it risks creating a much bigger outbreak of inflation than the Fed expects, could cheapen the dollar and it's just another example of trying to make the government fix the problems that only the private sector can fix.
INSKEEP: Okay, what's Ben Bernanke say in response to that?
Mr. WESSEL: Ben Bernanke says the Congress gave me the job of maximum sustainable employment and price stability, we have neither. We have unemployment very high. He says it might even rise from today's high levels and we have inflation so low that he thinks it's dangerous that it's so low and threatening to go lower.
He thinks he should do whatever it takes. And the one thing he can do - since he can't cut short-term interest rates - is to try and push down long-term interest rates by buying a lot of bonds. That's what monetary policy is supposed to do, and that's what he's doing.
INSKEEP: So that's what he's saying in this speech in Germany today. Does Bernanke think of the moves by the Fed are enough to save the economy?
Mr. WESSEL: No. He thinks the Chinese are making life miserable for the U.S. and everybody else by refusing to let their currency rise more rapidly. And he thinks that - he says in his speech that Congress and the president should do a package of more short-term fiscal stimulus now, tax cuts perhaps, combined with a credible package of deficit reduction that will take effect when the economy is stronger.
INSKEEP: Later on he wants deficit reduction.
Mr. WESSEL: He wants decision now for deficit reduction that would take effect later.
INSKEEP: David Wessel of The Wall Street Journal, thanks as always.
Mr. WESSEL: You're welcome.
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