But this is the worst recovery the nation has ever seen. Ben Bernanke is concerned. As chairman of the Federal Reserve, Bernanke has enormous power over the world economy. And he has used that power in ways that the world has never seen.
During the panic of 2008, he committed trillions of dollars to rescue the financial system. And the Fed dropped interest rates nearly to zero.
Now, in a new move that has become controversial, Bernanke intends to commit another $600 billion to hold down interest rates.
Chairmen of the Fed rarely do interviews. But this week, Bernanke feels he has to speak out because he believes his critics may not understand how much trouble the economy is in. We wanted to know whether we're headed for another recession, whether Congress should extend the Bush tax cuts.
But first we wanted to talk about unemployment which has been at 9.5 percent or more for 16 months.
Interview with Ben Bernanke
On "60 Minutes" this week, Scott Pelley interviewed Fed Chairman Ben Bernanke, discussing a wide range of economic issues. "60 Minutes Overtime" presents unaired excerpts from that interview.
Chairman Ben Bernanke: 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. And it looks that at current rates, that it may take some years before the unemployment rate is back down to more normal levels.
Scott Pelley: We lost about eight million jobs from the peak. And I wonder how many years you think it will be before we get all those jobs back?
Bernanke: Well, you're absolutely right. Between the peak and the end of last year, we lost eight and a half million jobs. We've only gotten about a million of them back so far. And that doesn't even account the new people coming into the labor force. At the rate we're going, it could be four, five years before we are back to a more normal unemployment rate. Somewhere in the vicinity of say five or six percent.
Four or five years. And Bernanke told "60 Minutes" something else that makes that even more painful.
Bernanke: The other aspect of the unemployment rate that really concerns me is that more than 40 percent of the unemployed have been unemployed for six months or more. And that's unusually high. And people who are unemployed for such a long time, their skills erode. Their attachment to the labor force diminishes and it may be a very, very long time before they find themselves back in a normal working position.
Bernanke was appointed in 2006 by President Bush and reappointed by President Obama. He grew up in Dillon, S.C., the son of a drugstore owner. He studied economics at Harvard and MIT and chaired the economics department at Princeton.
Pelley met Bernanke Tuesday (Nov. 30) in the Thompson Library on the campus of The Ohio State University. He was in Columbus on one of his frequent trips to hear how people are coping with the economy.
Earlier in the day he heard from the CEOs of Ford and IBM but also from small business owners who told him they were having trouble getting financing from banks.
Pelley: The major banks are racking up profits in the billions. Wall Street bonuses are climbing back up to where they were. And yet, lending to small businesses actually declined in the third quarter. Why is that?
Bernanke: A lot of small businesses are not seeking credit, because, you know, 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 has gone down. But some also can't meet the terms and conditions that banks are setting.
Pelley: Is this a case of banks that were eager to take risks that ruin the economy being now unwilling to take risks to support the recovery?
Bernanke: We want them to take risks, but not excessive risks. We want to go for a happy medium. And I think banks are back in the business of lending. But they have not yet come back to the level of confidence that, or overconfidence, that they had prior to the crisis we want to have an appropriate balance.
Bernanke's first interview ever as Fed chairman came in 2009 shortly after the panic.
It was then that he gave "60 Minutes" and Scott Pelley a rare opportunity to see the Federal Reserve headquarters in Washington, D.C.
Last month, Bernanke announced the Fed's intent to buy $600 billion in U.S. Treasury securities, which is supposed to have the effect of lowering rates on long term loans for things like cars and homes.
Bernanke wanted to emphasize that these are the Fed's own reserves. It's not tax money. It does not add to the federal deficit.
Bernanke: It has to do with two aspects. The first is unemployment. The other concern I should mention is that inflation is very, very low, which you think is a good thing and normally is a good thing. But we're getting awfully close to the range where prices would actually start falling.
http://money.cnn.com/2010/12/05/news/economy/ben_bernanke_60_minutes/index.htm?iid=RNM
http://www.cbsnews.com/stories/2010/12/03/60minutes/main7114229.shtml?tag=contentMain;cbsCarousel
Bernanke turns obfuscatory
When Ben Bernanke appeared on “60 Minutes” in March 2009, he was immediately embraced by middle America and overnight became considered the foremost explainer of economic concepts to the nation. This time around, Bernanke’s much more embattled. And his answers are much less clear, much more political, and much more contentious. This is not how impartial technocrats should speak:
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.
Yes, Ben, you are printing money. It’s how you pay for those Treasury bonds you’re buying. Greg Ip says so, and so does Scott Grannis, who helpfully provides this chart from the first round of QE:
Look at the y-axis, and you’ll see that $600 billion is a lot of money, even if it’s less than we saw in QE1. Clearly the monetary base is changing in a significant way.
Bernanke continued with this:
Pelley: Can you act quickly enough to prevent inflation from getting out of control?
Bernanke: We could raise interest rates in 15 minutes if we have to. So, there really is no problem with raising rates, tightening monetary policy, slowing the economy, reducing inflation, at the appropriate time. Now, that time is not now.
Pelley: You have what degree of confidence in your ability to control this?
Bernanke: One hundred percent.
Bernanke’s first response doesn’t actually answer Pelley’s question: Pelley didn’t ask how long it would take to raise interest rates, he asked how long it would take to get inflation under control. Obviously, it would take longer than 15 minutes. How much longer, Bernanke doesn’t say. (And, sadly, Pelley doesn’t push him.)
And Bernanke’s second response is a lie. Or if it isn’t, he should be fired immediately. No central bank governor can or should ever have 100% confidence in anything: only a psychopath who will never change his mind can say that. The Fed’s ability to control inflation is a dark and mysterious thing; it’s not some kind of iron-clad law of physics.
BBernanke knows that he has friends at “60 Minutes”, and indeed they let him run down his talking points, giving no pushback along the way. He wouldn’t get away with this kind of performance if he started giving Trichet-style press conferences. Which is one reason I suspect that’s not going to happen.
http://blogs.reuters.com/felix-salmon/2010/12/06/bernanke-turns-obfuscatory/
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