America’s Economy Rejuvenates

U.S. Federal Reserve chairman Ben Bernanke said today that America’s financial state and housing market have improved, but that loose monetary policy is still needed. Government spending reductions and tax increases have hurt the recovery but will have a lesser effect going forward, and the economy should perform well over the next few quarters.

Bernanke, about to step down at the end of this month, spoke at the 2014 annual American Economic Association meeting.

Regarding the Federal Reserve’s December 2013 decision to reduce monthly asset purchases from $85 billion per month to $75 billion per month, Bernanke also makes clear that this does not at all imply that the Federal Reserve is changing its loose monetary policy had changed; it just reflects a substantial improvement in the job market.

In response to parts of the world that believe that America is slow to recover and that the Federal Reserve should take responsibility for its mistakes, Bernanke states that America’s recovery is faced with resistance, suggesting that without support for loose monetary policy, economic growth will weaken or reverse.

Bernanke says that the unemployment rate remains at 7 percent and the number of long-time unemployed workers also remains high. However, at the same time, the financial market is taking a positive turn and the housing market is balancing out the federal government’s fiscal austerity and tax increases. The future of the U.S. economy looks bright, but it is still important to learn from the past and exercise caution.