Speaking at the National Press Club,Bernanke urged Congress to address spending and tax issues directly and not use debt limit as a “bargaining chip” in the debate. He said if the public debt limit – which was increased to $14.294 trillion almost a year ago – is not increased in the spring,the United States might give the impression that it is not able to pay its creditors.
“The United States would be forced into the position of defaulting on its national debt,” Bernanke said. “The implications of that for our financial system,for our fiscal policy and for our economy would be catastrophic.”
Asked if the political unrest in Tunisia and Egypt was linked to food shortages caused by the Fed’s large-scale asset purchases,Bernanke said it was “entirely unfair” to attribute excess demand pressures in these countries to U.S. monetary policy.
“As people’s diets become more sophisticated,as they eat more beef and less grain,the demand for food grows,” Bernanke said. “That’s the primary long-term factor affecting the price of commodities and food.”
He said further proof that the Fed’s policy is not responsible for food shortages is that food in Egypt is priced in Egyptian pounds,not in dollars.
“Clearly,what’s happening is not a dollar effect,” Bernanke said. “What’s happening is a growth effect,primarily in emerging economies,creating a tremendous demand of commodities which is driving up the relative prices of those commodities.”
Bernanke said the Fed’s monetary policy is aimed at stabilizing the U.S. economy.
He said that equity prices have risen since August when the Fed bought government bonds,the markets are more stable and inflation remains low,but at a more normal level.
He expressed optimism about unemployment levels decreasing in the coming years.
“The sense is that employers are becoming more willing to hire,” he said. “I think we’ll start seeing some stronger payroll reports and some lower unemployment rates pretty soon.”
Asked which team he’s rooting for in this weekend’s Super Bowl,Bernanke said he’ll remain objective because his favorite team isn’t playing.
“You know,the Redskins didn’t make it this year,once again,” Bernanke said. “But I’m looking forward to the game,and I think GDP will drop to nothing during that three-hour span.”