In testimony today before the Senate Budget Committee, Federal Reserve Chairman Ben Bernanke, said that it will take 4-5 years to get back to normal unemployment.
Bernanke defended QE2, and said that Congress needs to reduce the federal deficit.
“We have seen increased evidence that a self-sustaining recovery in consumer and business spending may be taking hold,” Bernanke said.
The really troubling part of Bernanke’s testimony is that he said it will take an additional 4-5 years to return to normal employment. For starters, the Fed can’t even see what’s going to happen in 4-5 weeks, much less 4-5 years.
This is unacceptable that the Fed sees it taking this long. Perhaps those are right that the Fed should operate under a single mandate, and not a dual one.
If employment is going to take that long to return to normal, a full eight years after the financial crisis, we may very well be onto our next financial crisis before we fully recover from this past one.
Bernanke said the job market has “improved only modestly at best,” and “considerable time will likely be required before the unemployment rate has returned to a more normal level.”
This is incredibly unacceptable, and it makes bears like David Rosenberg, and Nouriel Roubini actually sound like they have a better idea of what’s happening in the long run than someone who is supposed to be our brightest economic mind.
Bernanke also had the audacity to talk about the federal deficit, despite his inability to do his job properly. “It is widely understood that the federal government is on an unsustainable fiscal path,” he said. “Yet, as a nation, we have done little to address this critical threat to our economy. Doing nothing will not be an option indefinitely; the longer we wait to act, the greater the risks and the more wrenching the inevitable changes to the budget will be.”
I understand the Fed has done all they can to try to foster optimum employment, but if these programs aren’t working, why keep trying them? The definition of insanity is doing the same thing and expecting different results.
Another 4-5 years of high unemployment is not something this country can deal with. Please Ben, we implore you. There has to be additional tools that the Fed has to get us out of this situation, or it really looks like the end of America as the world’s superpower.
In those 4-5 years, China will have caught and surpasses us as the world’s preeminent economic power and we’ll just be twiddling our thumbs. We’ll probably also be on QE15 at that point.
— Jonathan Chen