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Sen. Casey Holds Hearing With Federal Reserve Chairman

By David Gerber, Contributing Writer

On Tuesday, Joint Economic Committee Chairman Senator Bob Casey questioned Federal Reserve Chairman Ben Bernanke during a hearing that was conducted to gain a better grasp on what the Federal Reserve and Congress can initiate in order to stimulate economic growth in the United States.

It was not a session in which Bernanke was grilled about any such proposal, past or presently made. In a very mellow manner, Senator Casey questioned Mr. Bernanke about realizations on the economical situation, national as well as global, currently faced and brought to light various items that are highly effective towards this economy, both positive and negative.

Casey proceeded to ask Bernanke, “As a result of the Fed’s latest step to help the U.S economy in the maturity extension program initiative, how much of a decline in long term interest rates would you expect to see?”

“This step to help the U.S. economy should bring down long-term interest rates by about 20 basis points, or a fifth of a percentage point,” Bernanke said. “That is roughly equivalent to cutting the Fed’s benchmark short-term rates by half a point – a significant step but not a game changer.”

According to Bernanke, this initiative should moderately help job creation and growth. This is particularly important now since the economy is very close to recovery mode as well as very vulnerable to faltering.

It will also be helpful in keeping prices near price stability level and at the same time providing some room for growth.

Another question the Senator submitted for response was the issue dealing with China and their degenerated currency, which has had a significant effect on the global market recovery since the great recession hit in 2008. Casey asked:

“On Chinese currency manipulation, there is a unanimity back at home in Pennsylvania and beyond about Chinese currency policies and the effect they have had upon jobs and our communities… has the Fed attempted to quantify the magnitude of the impact of this subsidy on the U.S economy and jobs and do you have a sense of the aggregate number of jobs lost because of this policy?”

“No, we follow the work of the IMF and various think tanks which have found that Chinese currency manipulation is undervalued by a significant amount,” replied Bernanke.

“The biggest concern now is that because of the Chinese manipulated currency policy, it is not allowing the global economy to recover at a normal rate. Advanced industrial states such as the U.S and Europe are growing slowly while emerging market economies are growing quickly. During a normal recovery, this would be switched, and the Chinese currency policy is blocking the ability for this to happen and in turn hurting the recovery process.”

The Senate is currently reviewing legislation which would crack down on Chinese currency manipulation.

Also covered in the hearing were policies related to labor markets, housing, trade and regulation. Among many proposals that were presented, Senator Casey’s Small Business Job Creation Tax Credit Act (S.1330) will increase employment through tax incentives and give American small businesses the incentives they need to increase hiring.

As reported by the London Stock Exchange, “The U.S. recovery from the deep recession–now in its third year–has been much less robust than the Fed had hoped,” Bernanke said, and Europe’s continuing financial crisis poses additional challenges. Bernanke warned lawmakers at the hearing that the U.S. jobs market is likely to remain sluggish for some time.

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