Even as he warned about the need for a long-term plan to address "unsustainable" budget deficits, Bernanke said steep reductions in government outlays could compromise growth at a time when employment is just beginning to rebound.
"The cost to the recovery would outweigh the benefits in terms of fiscal discipline," Bernanke told the House of Representatives' Budget Committee. "I think we really need to take a long-term view."
Bernanke offered few clues into whether the Fed might extend its controversial policy of buying $600 billion in government bonds beyond its June deadline, nor did he signal any inclination to cut the program short.
The Fed launched the bond-buying plan in November in an attempt to keep long-term borrowing costs down and support a fragile economic rebound.
Acknowledging renewed momentum in the economy, Bernanke said a drop in the jobless rate to 9 percent in January from 9.8 percent in November, the biggest two-month decline since 1958, was "grounds for optimism."
*Is it worrisome that the head of FED Reserve may be only one that doesn't realize drop in unemployment rate was caused by huge drop in those seeking jobs? That if you cannot find a job after one year you are dropped off the rolls.....? that this is "cause for optimism"?
The stock market shows a V SHAPED recovery, because companies are shwoing profits by cutting expenses, you can only take that so far. Stock market is also targeted by the FED, so its a rigged game and IMHO doesn't represent any real economy.
The economy is so weak in its recovery 2 years after lowering rates to 0%, they cannot change any of their policies.
D
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