Federal Reserve Chairman Ben Bernanke told a Senate banking panel that the Fed has marginally upgraded its forecast for the U.S. economy, which it now expects to grow at a rate from 3.5 to 4 percent in 2011.
On Capitol Hill, Bernanke also spoke about the gold standard, the dollar — and gave the GOP's proposed spending cuts some political cover.
Answering a question about the possible negative impact of the spending cuts backed by Republican legislators, Bernanke said that the Fed's economists see the cuts causing fewer problems than had been forecast by experts from Goldman Sachs and Moody Analytics.
During Tuesday's session, Sen. Jim DeMint (R-SC) asked Bernanke if perhaps a return to the old ways — in the form of the gold standard — would help.
According to The Wall Street Journal, Bernanke admitted that gold delivered some periods of price stability. But "I don't think it's a panacea," he told DeMint. Plus, he added, there isn't enough gold to support the U.S. money supply, the Journal reports.
The good old days also came up when Sen. Mark Kirk (R-IL) asked about disconnecting the U.S. dollar from the federal debt.
After Kirk reminded Bernanke that the two were uncoupled during the presidency of Andrew Jackson, the Journal reports that Bernanke answered, "So this was before the Civil War, this was during the period where individual banks issued currency. We didn't have a national currency."
Bernanke also said that while high inflation is unlikely, rising oil prices could hurt the recovering U.S. economy. In other economic news, you can check out Planet Money's breakdown of who holds most of America's debt.