Fed Chairman Ben Bernanke came out today and said that long-term higher oil prices will pose a danger to the economy. This assessment contridicts what Treasury Secretary Timothy Geithner reported last week when he was quoted as saying, "Central banks have a lot of experience in managing these things."
In an article this morning from the Associated Press, Chairman Bernanke cited rising oil and other commodities as a danger to the economy.
Federal Reserve Chairman Ben Bernanke told Congress Tuesday that a prolonged rise in oil prices would pose a danger to the economy.
He also cited other risks to the economy, including rising prices for oil, gasoline, food and other commodities, and further weakness in home prices. All could prompt Americans to spend less.
In fact, we are already seeing this in a report yesterday from the Bureau of Economic Analysis that showed in January, consumers were spending much less, and saving more.
While the Fed Chairman grudgingly admits that higher oil prices could be a danger to the economy, Treasury Secretary Geithner last week said unequivocally that the rise in oil prices would have no effect on our economic growth. In an article from Zerohedge last Wednesday, Geithner said that the economy is not only strong enough to handle surging oil prices, but he made the absurd statement that our economy is now better than before the recession hit.
U.S. Treasury Secretary Timothy F. Geithner said the economic recovery has put the world on a better footing to withstand the increase in oil prices caused by turmoil in the Middle East.
“The economy is in a much stronger position to handle” rising oil prices, Geithner said today during a Bloomberg Breakfast in Washington. “Central banks have a lot of experience in managing these things.”
Geithner also said the U.S. financial system is in better shape than before the recession and is able to provide the funding needed for the expansion.
“The core of the American financial system is in a much stronger position than it was before the crisis,” he said. “We’re way ahead of any other major economy.”
Since the Treasury Secretary and the Chairman of the Federal Reserve are on completely opposite ends of the debate in regards to what higher oil prices will do to the US economy, Americans need to be very cautious about the rhetoric coming from our economic planners. Either their assessments of the data are flawed or show incompetence, or what each is saying is political spin to keep the consumer and the public from knowing what is actually happening with inflation and rising prices.
Fed Chairman Bernanke is not qualified or capable of dealing with an economic crisis, and the rising prices in oil are indeed a danger to not only the economy, but to all Americans who have to pay for higher gasoline and food.
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