Bernanke's Congressional Testimony

 Chairman of the Federal Reserve, Ben Bernanke, recited a prepared testimony to Congress on Wednesday July 17, 2013 regarding the economic outlook of the United States. In his remarks, Bernanke highlighted how the Federal Reserve is going to approach the next steps of the current asset purchase program known as, 'quantitative easing'. Quantitative easing was introduced at the peak of the financial crisis in November of 2008, and has been segmented into three separate rounds over the past years. The goal of quantitative easing is to stimulate the economy in a manner that is somewhat unconventional to traditional expansionary monetary policy. The Federal Reserve has come to rely on quantitative easing in the past years, because short-term interest rates have already been lowered to zero percent, and additional monetary policy has been needed to accompany standard expansionary policies to stimulate economic growth. Most recently in the third round of quantitative easing implemented in the United States, the Fed has been spending a consistent eighty five billion dollars a month on mortgage-backed securities and US treasuries in order to breath life into the economy. 

 In his statement to Congress on Wednesday, Bernanke seemed cautiously optimistic that the Fed could possibly begin tapering down its asset purchases so long as projected economic growth would continue in the coming quarters, unemployment rates continue to move down from their current 7.6% to the goal of 6.5%, and inflation moves closer to the goal of 2%. Bernanke made it clear though, that there was not a rigid plan in place and that the Fed would act accordingly to the multitude of varying economic situations it may be  presented with in the near future. "Because our asset purchases depend on economic and financial developments, they are by no means on a preset course".

 

Bernanke and the Fed are under continuously mounting pressure from Congress and the public to come up with a successful economic plan for the future. Quantitative easing has proven to have strong positive effects in stimulating our economy in the past, but is it as simple as just creating another round of QE to solve our problems? Many people feel that Bernanke's spending plans are just smothering the real problems by throwing more and more money at the situation. One thing that is for sure, is that the accuracy of Bernanke's forecasts have very important implications for the future of our economy. Bernanke is most likely set to exit his position as chairman of the Fed this coming January, and would presumably like to achieve this without creating any new major economic issues. For the time being, it is fine that the Fed does not have a rigid plan, it is even a good thing, as the economy can always throw an unexpected curve ball. With this being said, it is important for companies to have a backup plan that does not rely on the Fed being right in their decision making. Even if the Fed does get it right, companies need to account for lag time following decisions made by the Fed, as well as unexpected slumps or accelerations in the economy that may affect sales.

 http://www.forbes.com/sites/billconerly/2013/07/18/ben-bernankes-no-plan-and-your-business-plan/
http://www.businessinsider.com/ben-bernanke-humphrey-hawkins-testimony-2013-7
http://www.usatoday.com/story/money/business/2013/07/17/bernanke-congress-testimony-analysis/2524053/
http://www.opendemocracy.net/openeconomy/ross-heard/qe-timeline-of-quatitative-easing-in-ushttp://beta.fool.com/mohamedassed90/2012/08/08/think-quantitative-easing-good-us-economy-here-are/8949/