Bernanke says more support possible if economy weakens

[Gerald]

The chairman of the Federal Reserve, Ben Bernanke, has said the US central bank is prepared to renew stimulus efforts if the economy remains weak.

The Fed's second quantitative easing programme (QE2) ended two weeks ago.

Speaking to members of Congress, Mr Bernanke also said the US could expect only "moderate" growth over the coming quarters.

He added that the inflation pressures seen in the first half of 2011 were "transitory" and should ease.

He cited higher commodity prices and the earthquake in Japan, which led to parts shortages and drove up vehicle prices, as reasons for why inflation picked up.

The Fed expects to keep its ultra-low interest rate policy in place "for an extended period", he said.

The dollar extended earlier losses against the euro following Mr Bernanke's comments, with the euro rising more than a cent to $1.4088.

Separately, ratings agency Moody's said it was placing the US's triple-A debt rating on a downgrade watch due to the rising chance that its debt ceiling will not be raised in time to avoid a default.

"The review of the US government's bond rating is prompted by the possibility that the debt limit will not be raised in time to prevent a missed payment of interest or principal on outstanding bonds and notes," Moody's said.

"As such, there is a small but rising risk of a short-lived default."

Revised forecasts:

"Once the temporary shocks that have been holding down economic activity pass, we expect to again see the effects of policy accommodation reflected in stronger economic activity and job creation," Mr Bernanke said.

"However, given the range of uncertainties about the strength of the recovery and prospects for inflation over the medium term, the Federal Reserve remains prepared to respond should economic developments indicate that an adjustment in the stance of monetary policy would be appropriate."

He added that Fed forecasts for June, which had already been significantly revised down from April, had not incorporated recent data such as last week's employment report.

http://www.bbc.co.uk/news/business-14142621


Note: 13 July 2011 Last updated at 21:32 GMT

[Skybird]

History will know him as Bernanke the Alchemist. He created gold from rocks and money from nothing. :yeah:

[TorpX]

I have yet to hear of any reason why the Federal Gov't cannot use the incoming tax revenue to pay the interest and principal (and other essential expenses).

[Gerald]

Ratings agency Moody's has said it may cut the US AAA debt rating, citing the "rising possibility" the US will default on its debt obligations.

The agency warned the likelihood the US would fail to raise its statutory debt limit in time to avert default was low but not insignificant.

It came as a fourth day of cross-party talks in Washington on the debt limit were said to have ended stormily.

US Fed chief Ben Bernanke said a default would cause a "major crisis".

Speaking before Congress on Wednesday, the Federal Reserve chairman warned it "would send shockwaves through the entire financial system".

As tough negotiations continue on Capitol Hill about raising the debt limit, President Barack Obama reportedly told a top Republican: "Enough is enough."

He made the remark while heatedly rejecting Republican House Majority Leader Eric Cantor's call for a short-term deal based on spending cuts, according to Democratic officials and Republican aides familiar with the talks.


'Rising default risk'

The tricky negotiations are due to resume on Thursday.

President Obama needs the Republican-led House of Representatives and Democratic-held Senate to sign off a deal to close the US deficit, while allowing Washington to borrow past a 2 August deadline.

He has said he is willing to countenance cuts to social safety-net programmes dear to Democrats, as long as there are tax rises for the rich.

Republicans have rejected the latter proposal, saying that would stifle investment and job growth.

Moody's became the first of the big three ratings agencies - the others being Standard & Poor's and Fitch - to place the US's triple-A rating on review for a possible downgrade.

http://www.bbc.co.uk/news/business-14142621

Note: Update Record,14 July 2011 Last updated at 07:12 GMT

[mookiemookie]

I seem to recall reading a poll recently that showed that a substantial majority of the public think there would be no significant problems from a default, and that if we don't increase the debt limit this would somehow balance the budget without much difficulty.

It's sad to see that people are more educated on the nuances of the Casey Anthony trial than something as important as this. It's true what they say - we get the leaders we deserve.

[Armistead]

Bernanke has to be GOP, all he's done is make corporations richer at the taxpayers expense. The community banks will soon be a thing of the past as large banks take over 99% of all banking and remain too big to fail.

Read last night that 1/3 of the bail out money given to big banks was used to invest in foreign banks, not to help save homes in the US.

[Skybird]

How many people know that the most important of the Chinese rating agencies already has downgraded the US's rating last year? In Asia, this is already well-known, but we in Europe and America are so far away that we easily miss such details. With the balance shifting towards the Chinese economy weight, the Chinese agencies will become more and more influential and important. Just wait for it: the question si not if, but when. Compared to that, the rage of Euro-politicians at US rating agencies and their demand to have a european rating agency is just an obvious and pathetic attempt to deceive the people and make somebody giving the Euro the opportunistic ratings that is politically wanted, but not necessarily reasonable in economic truth and value. I would not give a damn for the rating assessments of a European run rating agency called to life by Euro politicians, therefore. On the other hand, I have total immunity that protects me from buying bonds or stocks in general, sinceI am allergic to both. :D

[mookiemookie]

How many people know that the most important of the Chinese rating agencies already has downgraded the US's rating last year? In Asia, this is already well-known, but we in Europe and America are so far away that we easily miss such details. With the balance shifting towards the Chinese economy weight, the Chinese agencies will become more and more influential and important. Just wait for it: the question si not if, but when. Compared to that, the rage of Euro-politicians at US rating agencies and their demand to have a european rating agency is just an obvious and pathetic attempt to deceive the people and make somebody giving the Euro the opportunistic ratings that is politically wanted, but not necessarily reasonable in economic truth and value. I would not give a damn for the rating assessments of a European run rating agency called to life by Euro politicians, therefore. On the other hand, I have total immunity that protects me from buying bonds or stocks in general, sinceI am allergic to both. :D

Dagong is a joke. They've downgraded every country in the west and they give high credit ratings to the local issuers that pay them:

Dagong is not a force in global markets by any stretch -- its July downgrade of the United States prompted more amusement than market calamity.

http://www.reuters.com/article/2011/07/14/us-china-ratings-dagong-idUSTRE76D1KV20110714

[Skybird]

And a comment in German on how alienating the American state of politics is for observers from outside the US.

http://www.welt.de/debatte/kommentare/article13487177/Amerika-zwischen-Staatsinfarkt-und-Gotteskrieg.html

I never have hidden that I see a wide (and even widening) gap between Amrikca'S hoistoric and written claim what it wants to be, and hwat it really is, and that is a reality that is not even close to the historically preset ideals. However, I see the inner contradictions stiffening since years. And the more destructive it all becomes and the more critical and threatening the status is, the more proud Americans seem to become (reflected in the US polls quoted in the article as well). If that is not evading reality, then I don't know. Reminds me of the Euro guys: the miore disatrous the currency crisis becomes, the louder they hammer home the message that the Euro is a success story.

[Gerald]

Standard & Poor's has become the latest ratings agency to issue a warning of a possible downgrade to the US's debt rating.

It said there was a "one-in-two" chance that it may cut the US's AAA rating if a deal to raise the government's debt ceiling is not agreed upon soon.

The warning comes as cross-party talks in Washington have failed to reach a consensus on the issue.

The US has until 2 August to raise government borrowing limits.

"Today's CreditWatch placement signals our view that, owing to the dynamics of the political debate on the debt ceiling, there is at least a one-in-two likelihood that we could lower the long-term rating on the US within the next 90 days," the agency said.

The agency added that it was concerned the talks between the government and the opposition had become "more entangled" and the two sides were not budging from their respective positions.

"Consequently, we believe there is an increasing risk of a substantial policy stalemate enduring beyond any near-term agreement to raise the debt ceiling," S&P explained.

http://www.bbc.co.uk/news/business-14164395

Note; Update Record,15 July 2011 Last updated at 02:13 GMT