As the interview says, this is rare. Apparently, he decided to do it "because he believes his critics may not understand how much trouble the economy is in".
I suspect that is not a fair assessment. I don't think anyone has any real illusions about how much trouble the economy is in. It's probably more accurate to say that his critics do not agree with his solutions to the trouble the economy is in. But that's neither here nor there for the moment, because this is Big Ben's chance to shine. So watch the video, read the quotes, and revel in the rare interview provided by the Chairman of the Fed.
I'll have a few comments on the other side.
On unemployment:
"The unemployment rate is just not going down. Unemployment is just about the same as it was in mid-2009 when the economy started growing. So that's a major concern."On small businesses:
"At the rate we're going it could be 4-5 years before we are back to a more normal unemployment rate. Somewhere in the vicinity of 5 - 6 percent."
"More than 40% of the unemployed have been unemployed for 6 months or more, and that's unusually high."
"A lot of small businesses are not seeking credit because their business is not doing well, because the economy is slow. Others are not qualifying for credit, maybe because the value of their property is going down. But some also can't meet the terms and conditions banks are setting."On the subject of banks that took risks that caused the crisis not being willing to take risks to improve the economy:
"We want them [the banks] to take risks, but not excessive risks. We want to go happy medium. I think banks are back in the business of lending, but they have not yet come back to the level of confidence - overconfidence - that they had prior to the crisis. We want to have an appropriate balance."On deflation:
"The other concern I should mention is that inflation is very very low, which you think is a good thing. And it normally is a good thing. But we are getting awfully close to the range where prices start falling."On deflation:
"Well, I would say that this point, because the Fed is acting, I would say the risk is pretty low. But if the Fed did not act, then given how much inflation has come down since the beginning of the recession, I think it would be a more serious concern."Is the $600,000,000 a bad thing?
"I know that some people think that. What I think they're doing is looking at some of the risks and uncertainties associated with doing this policy action. What I think they're not doing is looking at the risks of not acting."What about the fear of inflation?
"This fear of inflation I think is way overstated. We've looked at it very very carefully. We've analyzed it every which way. One myth that's out there is that what we're doing is printing money. We're not printing money. The amount of currency in circulation is not changing. The money supply is not changing in any significant way. What we're doing is lowering interest rates by buying Treasury securities, and by lowering interest rates we hope to stimulate the economy to grow faster. So the trick is to find the appropriate moment when to begin to unwind this policy."Is inflation a lesser concern for the Fed?
"No. Absolutely not. What we're trying to do achieve a balance. We've been very very clear that we will not allow inflation to rise above 2% or less."Can you react fast enough to keep inflation from getting out of control?
"We could raise interest rates in 15 minutes if we have to."What are the odds we will fall back into recession?
"It doesn't seem likely that we'll have a double=dip recession.... Now that being said, I think a very high unemployment rate for a protracted period of time, which makes consumers, households less confident, more worried about the future - I think that's the primary source of risk that we might have another slowdown in the economy."Is the recovery self-sustaining?
"It may not be. It's very close to the border. It takes about 2.5% growth just to keep unemployment stable, and that's about what we're getting. We're not very far from the level where the economy is not self-sustaining."On deficit reduction:
"We need to pay close attention to the fact that we are recovering now. We don't want to take actions this year that will affect this year's spending and this year's taxes in a way that will hurt the recovery. That's important. But that doesn't stop us from thinking now about the long term structural budget deficit. We're looking at 10, 15, 20 years from now a situation where almost the Federal budget will be spent on Medicare, Medicaid, Social Security, and interest on the debt. There won't be any money left for the military or for any other services the government provides. We can only address those issues if we begin to think about them now."On taxes:
"Tax code is very inefficient, both the personal tax code and the corporate tax code. By closing loopholes and lowering rates, you could increase the efficiency of the tax code and create more incentives for people to invest."In short, there really aren't a lot of surprises here. He reiterates his stance on the economy, demonstrates his confidence that the Federal Reserve is up to the challenge of getting the US through the not-really-a-recession-any-more, and generally reminds everyone that whether you agree with his policies or not, he has reasons that seem good to himself and the rest of the Fed for the policies he sets. He really isn't just tossing a dart at a board and seeing what sticks.
I will say I was surprised by his comments on how long it will take to see unemployment rates come down. I mean, the Fed has been pretty candid about thinking they'll stay at 9.5% or so through 2011, but I did not expect to hear him say "4-5 years". I also did not expect (but I do agree with) his comments about the tax code.
Will this interview mollify his critics?
No.
Did you really expect it to?
No.
But it does do a good job of allowing him to make his case to the American people, and of reminding them that he didn't just get the job because he has a nice beard.
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