Bernanke says US economy is ‘close to faltering’

Fed chairman blames euro crisis, uncertainty over jobs market and political battles in Washington for gloomy economic outlook Federal reserve chairman Ben Bernanke has warned that US economic recovery is “close to faltering”, and that a “disorderly” default in the Greek debt would have a serious impact. In testimony to Congress, Bernanke was repeatedly quizzed about the impact of the European crisis on America. He said the US was an “innocent bystander” in the eurozone debt standoff and that US banks were not heavily exposed to Europe’s most troubled economies. But he warned that Europe’s economic woes were already having a negative impact on US stock markets. “Unless the European situation is brought under control, it could be a much more serious situation for the US economy,” he said. Bernanke also warned that political warfare in Washington was a threat to the US economy. He told the Joint Economic committee that the recent row over raising the debt ceiling had been very unhelpful at a time of increasing economic uncertainty. “It’s no way to run a railroad,” he said. In written testimony and during a question-and-answer session, Bernanke told Congress that the Federal reserve has acted forcefully to support growth and was prepared to take further action if necessary. But he warned that political infighting was a risk to the fragile US economic recovery. “Monetary policy can be a powerful tool, but it is not a panacea for the problems currently faced by the US economy,” Bernanke said. “Fostering healthy growth and job creation is a shared responsibility of all economic policymakers.” Bernanke was asked about the Occupy Wall Street protests, now in their third week in New York and spreading across the US. “I would just say that very generally people are quite unhappy about the state of the economy,” said Bernanke, and with “some justification”. “At some level I can’t blame them. Nine percent unemployment and slow growth is not a good situation,” he said. Senator Bernie Sanders of Vermont asked Bernanke: “In light of the protests, did Wall Street’s greed and recklessness lead to the crisis?” Bernanke said: “Excessive risk-taking had a lot to do with it.” So did the failures of regulators, he said. Bernanke said the US economy had grown more slowly than expected, in part because of unexpected setbacks like the Japanese earthquake and Europe’s debt crisis – but also because of the US’s own problems, especially in the jobs market. “The recovery from the crisis has been much less robust than we hoped.” “Probably the most significant factor depressing consumer confidence, however, has been the poor performance of the job market,” Bernanke said. “Private payrolls rose by only about 100,000 jobs per month on average over the summer — half of the rate posted earlier in the year – and state and local governments have continued to shed jobs,” he said. Moreover, recent indicators, including new claims for unemployment insurance and surveys of hiring plans, point to the likelihood of more sluggish job growth in the period ahead, he said. “We need to make sure that the recovery continues and doesn’t drop back,” Bernanke added. US economy Ben Bernanke US economic growth and recession US unemployment and employment data European debt crisis United States Dominic Rushe guardian.co.uk

Posted by on October 4, 2011. Filed under News, Politics, World News. You can follow any responses to this entry through the RSS 2.0. You can skip to the end and leave a response. Pinging is currently not allowed.