Bernanke Says Strong Actions Can Prevent 'Costly' Scenarios

[Amerigo Vespucci]

Source: The Wall Street Journal

By BRIAN BLACKSTONE
October 19, 2007 10:31 a.m.

In a speech Monday, Mr. Bernanke said, "risk-management considerations also played a role in the decision, given the possibility that the housing correction and tighter credit could presage a broader weakening in economic conditions that would be difficult to arrest." That justified "doing more sooner" with respect to policy, he said Monday.

Financial markets this week have raised the odds of another quarter-point rate cut at the end of this month, as housing and jobless-claims data suggest the economy may be weakening.

In his remarks Friday, Mr. Bernanke cautioned that assessing the economy's true state "remains a formidable challenge."

Uncertainty about the economy "provides a reason for the central bank to strive for predictability and transparency, avoid overreacting to current economic information, and recognize the challenges of making real-time assessments of the sustainable level of real economic activity and employment," Mr. Bernanke said.



Read more: http://online.wsj.com/article/SB119280297153464863.html?mod=googlenews_wsj

[spotbird]

1. Gee, isn't the dollar

crashing fast enough Ben?

What happened to mortgage rates with that last cut?

[David Zephyr]

5. You are right that lower rates will further weaken the dollar

A falling dollar cheapens the loans we owe to our foreign bankers in our national debt.

A falling dollar helps America's moribund manufacturing base by making our products cheaper abroad (I own a manufacturing company and the weak dollar helps).

Lower rates should translate into relief to the housing market and to homeowners facing refinancing hell now.

But,

A cheaper dollar also lowers the value of the U.S. stock market and scares off foreign capital.

A cheaper dollar is inflationary.

A cheaper dollar will make oil prices even higher as crude is traded more and more overtly and covertly in Euros.

The Fed Chair is damned if he does and damned if he doesn't.

But they will lower rates again because the wrath of homeowners and bankers who live here and can get out their pitchforks will get the Fed's nod.

[Deja Q]

7. I won't damn him if he doesn't.

Maybe we need to quintuple our population and have jobs come back home; that'll really increase the GDP and other factors that were leading to the problems in the first place?

[FarCenter]

9. I doubt that the Fed can lower rates

Lowering dollar interest rates would likely cause the dollar to tank in the foreign exchange markets. Not that it hasn't fallen some and will likely fall further. But $2 / euro is probably tolerable while $10 / euro is not. And the latter is what we'll see if rates are cut further.

[unhappycamper]

2. I know how you find $3,000,000,000 a week, Ben.

Get out of Iraq.

[Flabbergasted]

3. Bernanke believes the depression could have been averted if

the Fed had lowered interest rates faster.

[truthisfreedom]

4. Depression, huh? Looks like we need a national DR. FEELGOOD!

Ahem.

[cliss]

6. He's out of his mind.

The system is completely gutted, and he knows it. I love this part "avoid overreacting to current economic information".

Guess what the current economic information is?
There is no equity left in the financial system. It was all built on hype, diced & sliced, packaged into nice portfolios which were worthless.

They all know it, and they know there is absolutely nothing they can do about it.

All they can do it wait......until the public figures it out.

[Orsino]

8. Sounds like a dire warning, couched as innocuously as possible.

Republican code for "do something soon or be voted out."