The former heads of the Federal Reserve System – Ben Bernanke and Janet Yellen – are warning about dire times ahead for the United States economy. Whether President Donald Trump reopens the economy or not, Bernanke and Yellen are sounding the alarm about falling gross domestic product, surging unemployment, and a recovery that will take a long time.
Speaking at a Brookings Institution online event, Bernanke believes the U.S. economy could contract 30 percent or more this quarter. He also thinks the recovery could last a couple of years before the country returns to normal.
He told the online audience:
“Overall, it could be a very bad year for the economy. There are things we can do to open up the economy, significantly perhaps, but I don’t see the economy returning to a more normal state until there’s much greater confidence … that opening up the economy won’t restart the crisis.
The U.S. economy will recover and within a few years will show only modest marks of this experience.”
Overall, he thinks the fiscal and monetary response has been sufficient, though he does present the case that more needs to be done.
“If we could shut off the epidemic, of course the economy would bounce back quickly,” he said.
What does Yellen think?
The former Fed Chair told Newsweek that she anticipates a skyrocketing jobless rate will happen this week. Last week, the initial jobless claims topped 6.6 million, and it could soar again this week.
Ultimately, unemployment could go “quite a lot higher.”
“This is a huge, unprecedented, devastating hit and my hope is that we will get back to business-as-usual as quickly as possible,” she said.
Fed Chair Jerome Powell has so far responded with 0% interest rates, unlimited quantitative easing, and buying all sorts of bonds (Treasury, municipal government, and corporate). And the Fed is willing to do even more.
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