Daniel, I also got a kick out of the questions. A couple senators asked some tough questions, Ben cleverly avoided an answer and then the senator trailed off toward changing it into a comment and ending their turn. So they did not press Ben on the answer to the tough questions. I was in utter amazement at the lack of courage and staying power of these senators.
Since we are on the topic of the testimony, here are a few snippets:
On the deficit
Ben: “In 5-10 years, there will be increasing reluctance by foreigners to hold U.S. assets, and that will have effects on our economy and we need to address that….We should become more reliant on our own savings and reduce the account deficit.”
Inflation and wages
Ben: “I am surprised wages have not risen more by now….Wages offset by productivity gains are not inflationary…. Inflation is going to moderate over the next couple years”. [WHAT – a couple years before it moderates – what does that mean?]
Social Security and Medicare shortfalls
Ben: “Social Security doesn’t show up in the deficit. The deficit should include future liabilities of Social Security and Medicare. In 10-15 years, we’ll see more pressure from the transfer agreements and we need to address them”.
Risk of GSEs
Ben: “The portfolios of the GSEs are too large and pose the threat to stability of the financial system. We should give strong guidance of how to relate the mission to the size of the GSEs. I have a heightened concern that these portfolios could cause serious problems for the financial markets”.
Why we haven’t reduced energy dependence, although Brazil has done so
Ben: “We need to diversify our energy sources. The government can support research, and create environmental regulations that are more clear and constant, i.e. that don’t keep changing.”
Fed decision-making on rates
Ben: “The Fed is a consensus-based organization. Spirited discussion precede the meetings.”
Sarbanes: But these discussions don’t make it into the Minutes. Isn’t it good for the markets to hear alternate views?
Ben: “FOMC members are free to present their views to the public”.
