You are viewing this article in the archives. For the latest breaking news and updates in Ann Arbor and the surrounding area, see
Posted on Mon, Jan 14, 2013 : 7:07 p.m.

Federal Reserve Chairman Ben Bernanke touches on fiscal cliff, unemployment and debt ceiling in talk at U-M

By Ben Freed

Federal Reserve chairman Ben Bernanke sat down for a a wide-ranging and candid discussion at University of Michigan's Rackham Auditorium Monday evening that touched on topics from the fiscal cliff showdown to his pet dog.

With many in Michigan more preoccupied with the state's economic health than national monetary policy, Bernake also shared his thoughts on the local recovery. He said the diversifying of the economy bringing in more high tech industry as well as health care and educational service jobs are helping to relieve pressure on the manufacturing sector.

Get Ann Arbor news in your inbox

Keep your finger on the pulse of the Ann Arbor business community by signing up for the Business Review newsletter sent out early every Thursday morning. You can also sign up for the daily 3@3 email to see our best local stories every day.

“Places like the University of Michigan and Ann Arbor are a tremendous resource for entrepreneurs, people hoping to build new high tech businesses,” he said.

“It’s a good sign to see that America still has a strong industrial base, but that it’s also diversifying.”

More than 1,000 students and Ann Arbor community members packed the auditorium to hear the discussion, which was part of the Policy Talks @ The Ford School series. Bernanke was interviewed by Dean Susan Collins and then took questions from the audience and Twitter.

Throughout the discussion, Bernanke focused on what he referred to as the dual mandate of the Federal Reserve Bank, to achieve price stability and low unemployment.

“Price stability means low inflation. We’ve taken that to mean 2 percent, and it’s been there and is on track to remain there so we’re doing well,” he said.

“Unemployment is still quite high. It’s been coming down very slowly, and the cost of that is enormous in terms loss of revenue, personal hardship, and in terms of talent and skills being wasted.”

Bernanke emphasized that by lower the federal interest rates close to zero percent, the Fed is already in the world of “nonstandard monetary policies.” He said he was prompted take aggressive action by studying the bank’s actions during the Great Depression.

“There’s two things we learned from the depression, the first was don’t let monetary policy get too tight. In the 30s there was deflation and that was very damaging to the economy,” he said.

“The Fed also didn’t do very much in the 30s to stabilize the banking system and a third of the banks in America failed.”

While he admitted that his policies have come under criticism, he said he believes that things are moving in the right direction and that he is “cautiously optimistic about the next couple of years.”

Freshman Santash Mohan attended the talk hoping to get a glimpse into Bernanke’s economic crystal ball. He said he enjoyed the talk and agreed with the chairman’s assessments.

“There’s just a lot of uncertainty out there,” he said. “Like Bernanke said, we have to hope for positive news.”

As the discussion and questions progressed, Bernanke seemed increasingly exasperated with Congress.

“We will follow our mandate which is to help the economy be strong, Congress should do their job which is to address fiscal issues,” he said at one point.

He echoed Presdient Barack Obama’s statements at a news conference earlier Monday calling on the House of Representatives to raise the country’s debt ceiling.

“If Congress is approving spending and approving taxing, and those two things are not equal then it's logical that something has to make up the difference. And that’s going to be borrowing,” he said.

“I’m not saying deficits are good or bad, but there has to be a sensible plan for spending and a sensible plan for revenue… This is like a family saying ‘well we’re spending too much, let’s stop paying our credit card bill.’ It’s not the way to get into good financial condition.”

The talk had lighter moments as well. When the first question from Twitter contained multiple clauses, Bernanke’s initial response was, “Are you sure that was only 140 characters?”

The chairman revealed that while he believes the Internet is “an important source of intellectual exchange,” he also follows a number of baseball-related blogs.

Ben Freed covers business for You can sign up here to receive Business Review updates every week. Reach out to Ben at 734-623-2528 or email him at Follow him on twitter @BFreedinA2



Tue, Jan 15, 2013 : 5:25 p.m.

SATISFACTION IN LIFE : There is no easy solution to the problem of spending without discovering a formula to find satisfaction in life. Sooner, or later this nation will face the reality and will understand that the key to happiness does not come with a key to unlimited spending.

Stephen Landes

Tue, Jan 15, 2013 : 3:13 p.m.

Congress, unfortunately, is NOT approving spending these days. Thanks to the Senate we have not had a Federal budget for nearly four years. The House continues to propose budgets which they Senate refuses to take up. The President has proposed budgets which receive the only truly bipartisan votes in Congress; virtual 100% NO votes from both parties. So, we are on auto-pilot with continuing resolutions and the Congress' same old spending plan based on increasing spending year after year by at least the amount of increase in population and inflation with no end in sight. Ask Debbie Stabenow where the Senate version of the budget is -- she won't be able to find one.

Soulful Adrenaline

Tue, Jan 15, 2013 : 1:59 p.m.

Go back to bed america, your government has everything under control.


Tue, Jan 15, 2013 : 11:03 a.m.

I find it interesting a number of posts have suggested simply stop the mindless deficit spending, cut up the credit card, etc. But where do you start? How about all the grant money that makes places like A2 little boom towns in "down on their luck" states like MI? Where do all these "entrepreneurs" get the money to run money losing green tech companies for years at a time? Where does UM get the money to study the impact of TseTse fly infestation on the Great Lakes? Don't laugh, you should see some of the grant proposals that the Feds end up funding. Places like Ann Arbor would feel the pain of Federal spending cuts disproportionately. The whining and screaming of Ann Arbor's limo liberal elite after much needed Federal spending cuts ...would be thunderous.


Tue, Jan 15, 2013 : 2 p.m.

Everybody wants to cut *your* spending. They certainly don't want to give up their own little carve-outs.

Kai Petainen

Tue, Jan 15, 2013 : 4:23 a.m.

Bernanke's initial response was, "Are you sure that was only 140 characters?" best line of the interview. pretty funny.


Tue, Jan 15, 2013 : 3:31 a.m.

Easy to fix. Require the Fed to back the dollar with energy. Everybody needs energy to survive. Those who supply energy are rich. Those who use it must earn it back by producing more. Those who hold the paper like 60 trillion in derivatives are S.O.L. Got solar? Spare a battery kind sir?

Justin Altman

Tue, Jan 15, 2013 : 2:57 a.m.

Inflation @ 2%? What kind of inflation is that? It's certainly not inflation measured by money creation (true inflation). QE3 is expanding the monetary base faster than 2% per month. It's certainly not consumer spending power inflation, which is dropping like a lead balloon as all the newly printed monopoly money sits in the digital vaults of banks that have regulated all their competition out of the institutional investor market. It's certainly not price inflation, which has been at about 10% per year since about 2005. I would have like to have seen the Q&A published somewhere to see if any of the students had the guts to call Ben out on his distortion of facts - like the fact that Unemployment is only going down because people have been out of work too long to show up in official stats anymore.

Macabre Sunset

Tue, Jan 15, 2013 : 7:30 p.m.

One thing Obama has done is increase the amount of cash available at an unprecedented rate. There's more than twice as much out there as there ever has been in our country's history. What do you think that does to the value of the dollar? To hiring? The damage done to our economy in just the last few years is staggering.

Kai Petainen

Tue, Jan 15, 2013 : 5:22 a.m.

Justin.... I'm not sure about the students, but you can look on twitter as to the questions that were asked there.


Tue, Jan 15, 2013 : 4:35 a.m.

Expanding the money supply is not "true inflation" unless you assume that the velocity of money is constant, but it is not.

Trillion Dollar Magic Coin

Tue, Jan 15, 2013 : 2:09 a.m.

We've dealt with the revenue side, now it's time to move on and get serious about the overspending. Instead the Administration is floating the idea of minting a trillion dollar platinum coin to avoid discussing the fact that our children's lives far into the future are being spent now. It will all be pretty funny for a while, following the old saying that one goes bankrupt slowly at first, then all at once.

Macabre Sunset

Tue, Jan 15, 2013 : 7:28 p.m.

Let's say you're the first person in the history of the world to amass $1 trillion in personal wealth. Out of all the things you could buy, would a piece of metal that has only collectible value be your choice? At a premium, too? Maybe trillionaires, if there ever are any, aren't the smartest people in the world. But they certainly aren't the dumbest. $1 trillion - just $1 trillion - is more than $3,000 for every man, woman and child in America. By accumulating this staggering amount of debt, we are bankrupting our future. What Obama spends today belongs to our grandchildren.


Tue, Jan 15, 2013 : 6:22 a.m.

Hey, do not be so quickly dismissive of a trillion dollar coin. The government would only need about 17 or 18 of them now. Suppose the government mints 30 of these coins with the last ten being struck as certified proof coins. Being so rare and the largest American legal coin minted collectors will clamor to obtain one of the 10 released to the public. Each coin may demand a 20% or even 50% premium especially if a fancy display box is included. Imagine that the sale of the coins could generate an additional $5 trillion of revenue to apply to deficit reduction. Now would that not be an accomplishment?

G. Orwell

Tue, Jan 15, 2013 : 1:50 a.m.

Why do we need a central bank that controls our currency and acts as a middleman skimming trillions of dollars off the American people? The US Treasury can do everything the Fed can do without charging interest. Interest that is making banks and their owners very wealthy. Not to mention the financial mess the Fed has gotten the US and Europe into.


Tue, Jan 15, 2013 : 6:09 a.m.

I believe that the federal government has already raided the Social Security Trust Fund and the question now is whether any of that money will ever be returned-- with or without interest! By the way, since you brought up Social Security, why don't we just eliminate the cap on income subject to payroll taxation so the Social Security will remain solvent for the next 75 years as the CBO suggest? (Answer: the wealthy businesses that can afford to pay many employees more than the present cap of $113,700 do not want the added expense.) If the FICA tax base is expanded by including other income sources then the overall payroll tax rate can be reduced to everyone's benefit.

Stuart Brown

Tue, Jan 15, 2013 : 4:06 a.m.

Agreed, it is absurd for sovereign governments to borrow money at interest to private banks for public capital improvement projects. Here is an idea, if interest must be paid, turn the Social Security trust fund into a bank and deposit a few trillion dollar coins into the bank for public works projects. The interest on $2 Trillion in loans @ 2%/year is $40 Billion/year (which could be raised with a 30 basis point tax on stock transactions.) The economy gets a jump start and SS gets a new funding source.


Tue, Jan 15, 2013 : 12:30 a.m.

And I quote! This is like a family saying 'well we're spending too much, let's stop paying our credit card bill.' It's not the way to get into good financial condition." How about this Bernanke? STOP using the credit card! :) Cut it up. Burn it. Throw it away! Just stop already. lol


Tue, Jan 15, 2013 : 1:56 p.m.

This is not an accurate representation of Mr. Bernake's job. It is the President's job to propose budgets, and Congress's job to ratify them. The Federal Reserve plays no part in this.


Tue, Jan 15, 2013 : 5:09 a.m.

And, by your logic, stop spending all together and accept another recession and severe financial consequences for the poor. That's just fine for the top 2% who never have to worry about their standard of living declining. Ever hear of compassion?