Federal Reserve chairman Ben Bernanke, one of the most-watched figures in the financial world, said the United States could learn a lot from the world’s emerging economies before opening the floor to questions at an event this evening in Cleveland.
Bernanke said advanced economies like the United States “would do well to re-learn some of the lessons from the experiences of the emerging market economies,” including the “importance of disciplined fiscal policies, the benefits of open trade, the need to encourage private capital formation while undertaking necessary public investments, the high returns to education and to promoting technological advances, and the importance of a regulatory framework that encourages entrepreneurship and innovation while maintaining financial stability.”
During the Q&A session, Bernanke answered questions including from a high school student asking why he became an economist and his thoughts about the future of health care.
Bernanke said the U.S. health care system had unequal access and quality and said the country needed improved productivity such that the U.S. could deliver “more care for less money.”
His remarks came just as the Department of Justice asked the Supreme Court to review a lower court decision that struck down a key provision of the health care law.
Bernanke’s event was his first public appearance since the Federal Reserve announced one week ago it will do a debt swap, selling $400 billion of long-term securities for an equal amount of shorter-term instruments. The Fed’s Open Markets Committee’s new stimulus measure, dubbed Operation Twist, and its gloomy assessment of the economy was received coolly on Wall Street.
The moves fueled previous criticism by Republican politicians that Bernanke and the Fed were meddling too much in the U.S. economy. Bernanke did not address the criticism or the Fed’s recent efforts to drive interest rates lower than their already low levels.
Bernanke’s speech today before a packed audience at the Cleveland Clinic Ideas for Tomorrow, entitled, Emerging Market Economies on the Sources of Sustained Growth, laid out the status and challenges of emerging economies in Africa, Asia and Latin America.
Bernanke compared economist John Williamson’s views on growth in emerging economies from two decades ago, which were dubbed the Washington Consensus, to today’s prevailing views on the subject.
In his speech, Bernanke said there was “little controversy” in policies aimed at increasing macroeconomic stability.
“Abundant evidence has linked fiscal discipline, low inflation and a stable macroeconomic policy environment to stronger, longer-term growth in both emerging and advanced economies,” he said.
That remark came in contrast to what many Republican leaders in the House and Senate have said in criticism against the Federal Reserve.
Republican leaders sent Bernanke a letter last week urging the Fed not to implement further stimulus, an unusual move because the Federal Reserve is an independent agency.
Senate Republican Leader Mitch McConnell of Kentucky, Senate Republican Whip Jon Kyl of Arizona, House Speaker John Boehner of Ohio and House Majority Leader Eric Cantor of Virginia said further action could increase the risk of additional inflation.
Through two years of quantitative easing, the Fed has obtained about $1.7 trillion of federal bonds, or loans to the government.
Last week, the Fed said there are “significant” downside risks to the U.S. economy and repeated that economic conditions warrant “exceptionally low” interest rates through mid-2013, with inflation moderating slightly from earlier in the year. The Fed also expects some pickup in growth in the coming quarters and that unemployment rate will decline only gradually.