Federal Reserve Chairman Ben S. Bernanke said that an agreement on ways to reduce long-term federal budget deficits could remove an impediment to growth, while failure to avoid the so-called fiscal cliff would pose a "substantial threat" to the recovery.
"Cooperation and creativity to deliver fiscal clarity --in particular, a plan for resolving the nation's longer-term budgetary issues without harming the recovery -- could help make the new year a very good one for the American economy," Bernanke said in remarks to the Economic Club of New York at the Marriott Marquis Hotel in Times Square. "The realization of all of the automatic tax increases and spending cuts that make up the fiscal cliff, absent offsetting changes, would pose a substantial threat to the recovery."
Bernanke's efforts to bring down 7.9 percent unemploymentand spur the three-year expansion with purchases of $40 billion in housing debt each month are being impeded by Congress's inability to reach agreement to stabilize U.S. outlays and revenues and avoid the so-called fiscal cliff. Bernanke also said Fed policy will remain accommodative until the recovery is on a firmer footing.
Bernanke, 58, said that "uncertainty" about imminent tax and spending cuts, the ability of Congress to raise the debt ceiling in a timely manner, and the long-term challenges of balancing the U.S. budget appear "already to be affecting private spending and investment decisions and may be contributing to an increased sense of caution in financial markets, with adverse effects on the economy."
David Fuller's view Fed Chairman Ben Bernanke's position of influence has certainly been strengthened by President Obama's clear re-election victory. Consequently, we will know the outcome of his aggressive monetary stimulus, which is being copied in various forms in a number of other countries, and now also by the European Central Bank.
We are at the coal face, so to speak, and can invest in line with our understanding of Mr Bernanke's radical monetary policies and their influence, which will be studied for the rest of this century.
The current influence is likely to be more bullish than bearish, in fiat money terms, for precious metals, stock markets, and most industrial and agricultural commodities. Quantitative Easing (QE) has also been bullish for government bonds in a number of countries but this is creating a massive bubble, now in its latter stages.