There he is!: Federal Reserve Chairman Ben Bernanke waves from the veranda of the Jackson Lake Lodge at the start of the annual Federal Reserve conference in Jackson, Wyo., on Friday.
Is the recession over? Will there be another? Much like the famous groundhog from Punxsutawney, Federal Reserve chief Ben Bernanke showed up to offer an eagerly awaited sign—in this case to economists gathered Friday at Jackson Hole, Wyo., and to the world at large about whether we’re in for more hardship or a bit of relief in coming months. From the sound of it, the winter of our economic discontent isn’t over, but there might be some hope soon ... maybe, kind of. —KA
From Bernanke’s remarks at the Federal Reserve Bank of Kansas City Economic Symposium, Jackson Hole, Wyoming:
As I noted at the outset, when we last gathered here, the deep economic contraction had ended, and we were seeing broad stabilization in global economic activity and the beginnings of a recovery. Concerted government efforts to restore confidence in the financial system, including the aggressive provision of liquidity by central banks, were essential in achieving that outcome. Monetary policies in many countries had been eased aggressively. Fiscal policy—including stimulus packages, expansions of the social safety net, and the countercyclical spending and tax policies known collectively as automatic stabilizers—also helped to arrest the global decline. Once demand began to stabilize, firms gained sufficient confidence to increase production and slow the rapid liquidation of inventories that they had begun during the contraction. Expansionary fiscal policies and a powerful inventory cycle, helped by a recovery in international trade and improved financial conditions, fueled a significant pickup in growth.
At best, though, fiscal impetus and the inventory cycle can drive recovery only temporarily. For a sustained expansion to take hold, growth in private final demand—notably, consumer spending and business fixed investment—must ultimately take the lead. On the whole, in the United States, that critical handoff appears to be under way.