The US Federal Reserve chief backed a strengthened regulatory system as the key method to prevent a repeat of the financial crisis on Sunday, but said monetary policy could help pop future speculation bubbles.
In a speech in Atlanta, Fed Chairman Ben Bernanke offered little hint at a short-term change in interest rates, arguing that any revision in monetary policy should be done “cautiously,” but said the US central bank should be open to raising interest rates.
“All efforts should be made to strengthen our regulatory system to prevent a recurrence of the crisis and to cushion the effects if another crisis occurs,” Bernanke told the American Economic Association in a speech. “However, if adequate reforms are not made, or if they are made but prove insufficient to prevent dangerous buildups of financial risks, we must remain open to using monetary policy as a supplementary tool for addressing those risks — proceeding cautiously and always keeping in mind the inherent difficulties of that approach.”
“Maintaining flexibility and an open mind will be essential for successful policymaking as we feel our way forward,” he said.
The crisis — which swelled in September 2008 with a near-meltdown on Wall Street and provoked a global recession — was “very possibly ... the worst in modern history,” Bernanke said.
Also speaking at the event in Atlanta, Federal Reserve Vice Chairman Donald Kohn said he was weighing “the potential costs and uncertainties associated with using monetary policy” to fight speculative bubbles.
“We now need to reexamine, with open minds, whether conventional monetary policy should be used in the future to address developing financial imbalances,” Kohn said. “Monetary policy is a blunt instrument. Increases in interest rates damp activity across a wide variety of sectors, many of which may not be experiencing speculative activity.”
He warned: “If higher rates just weaken output and inflation without damping speculation, the economy could be even more vulnerable when the speculative bubble bursts.”
Bernanke for his part said increases in interest rates in 2003 or 2004 were “sufficient to constrain the bubble, [but] could have seriously weakened the economy at just the time when the recovery from the previous recession was becoming established.”
The Fed has stood accused of having fueled the housing bubble with extremely low interest rates, that encouraged many households to incur debt, often well beyond their financial means. The bubble burst in 2008 and the subsequent crisis brought the global economy to its knees.
MILITARY BOOST: The procurement was planned after Washington recommended that Taiwan increase its stock of air defense missiles, a defense official said yesterday Taiwan is planning to order an additional four PAC-3 MSE systems and up to 500 missiles in response to an increasing number of missile sites on China’s east coast, a defense official said yesterday. The official, who spoke on condition of anonymity, said that the proposed order would be placed using the defense procurement special budget, adding that about NT$1 trillion (US$32,88 billion) has been allocated for the budget. The proposed acquisition would include launchers, missiles, and a lower tier air and missile defense radar system, they said The procurement was planned after the US military recommended that Taiwan increase
POLITICAL AGENDA: Beijing’s cross-strait Mid-Autumn Festival events are part of a ‘cultural united front’ aimed at promoting unification with Taiwan, academics said Local authorities in China have been inviting Taiwanese to participate in cross-strait Mid-Autumn Festival celebrations centered around ideals of “family and nation,” a move Taiwanese academics said politicizes the holiday to promote the idea of “one family” across the Taiwan Strait. Sources said that China’s Fujian Provincial Government is organizing about 20 cross-strait-themed events in cities including Quanzhou, Nanping, Sanming and Zhangzhou. In Zhangzhou, a festival scheduled for Wednesday is to showcase Minnan-language songs and budaixi (布袋戲) glove puppetry to highlight cultural similarities between Taiwan and the region. Elsewhere, Jiangsu Province is hosting more than 10 similar celebrations in Taizhou, Changzhou, Suzhou,
TWO HEAVYWEIGHTS: Trump and Xi respect each other, are in a unique position to do something great, and they want to do that together, the US envoy to China said The administration of US President Donald Trump has told Chinese President Xi Jinping (習近平) “we don’t want any coercion, but we want [the Taiwan dispute] resolved peacefully,” US ambassador to China David Perdue said in a TV interview on Thursday. Trump “has said very clearly, we are not changing the ‘one China’ policy, we are going to adhere to the Taiwan Relations Act, the three communiques and the ‘six assurances’ that were done under [former US president Ronald] Reagan,” Perdue told Joe Kernen, cohost of CNBC’s Squawk Box. The act, the Three Joint Communiques and the “six assurances” are guidelines for Washington
DEEPENING TIES: The two are boosting cooperation in response to China’s coercive actions and have signed MOUs on search-and-rescue and anti-smuggling efforts Taiwan and Japan are moving to normalize joint coast guard training and considering the inclusion of other allies, the Japanese Yomiuri Shimbun reported yesterday. Both nations’ coast guards in June sent vessels to the seas south of the Sakishima Islands to conduct joint training, the report said, adding that it was the second joint maritime training exercise since the nations severed formal diplomatic ties in September 1972. Japan dispatched the Nagoya Coast Guard’s Mizuho, a 134m, 6,000-tonne patrol vessel which can carry a helicopter, while the Coast Guard Administration (CGA) sent the 126m, 4,000-tonne Yunlin, one of its largest vessels, the report
RSS