The Federal Reserve Chairman, Ben Bernanke, focused at a 75-minute discussion at Ohio State University on the importance of growth in the current economy to reduce the high levels of unemployment. He specifies how the slow growth is "not a credit issue. It’s not the financial system or a banking issue. I think at the end of the day it’s clarity.” However, the business owners on the panel complained about tight financial conditions, difficulty in obtaining credit, trade policies and currency manipulation.
The comment made by one of the students in the audience “If you inflate the economy without doing anything about growth, you’re just printing money,” sums up why just increasing the supply of money is not good enough. Consumers must express demand in the form of consumption for the economy to grow. When there is higher consumption, prices will increase (as demand increases), this will lower unemployment and the fear to spend will begin to evaporate and the velocity of money will increase, as opposed to the current hoarding of cash.
The article does, however, conclude that Ben Bernanke understood the need for clarity regulatory, trade and fiscal matters. This is a good sign that the focus will shift from increasing money supply to encouraging consumption.
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