Fed Chairman Ben S. Bernanke is betting the new U.S. economy is the same as the old one as he lays out arguments for more stimulus to revive it.
He made that diagnosis last week in a rebuttal to those who blame an 8.3 percent unemployment rate on structural shifts in the economy wrought by the financial crisis and who contend joblessness is permanently elevated.
â€œI see little evidence of substantial structural change in recent years,â€ Bernanke told fellow central bankers and economists at the annual monetary-policy symposium in Jackson Hole, Wyoming. â€œFollowing every previous U.S. recession since World War II, the unemployment rate has returned close to its pre-recession level.â€
The message for investors is Bernanke believes what he calls the â€œgrave concernâ€ of 12.8 million Americans out of work can be tackled by a stronger economic recovery, driven by monetary support if necessary. The view that the countryâ€™s woes are cyclical was a keen subject of debate in the shadow of the Teton mountains, dividing Bernankeâ€™s fellow central bankers, Wall Street economists and academics.
Backing Bernanke are Princeton Universityâ€™s Alan Blinder, Jan Hatzius of Goldman Sachs Group Inc. and Stanford Universityâ€™s Edward Lazear. On the other side are Richmond Fed President Jeffrey Lacker, Northwestern Universityâ€™s Robert Gordon and Mohamed El-Erian and Bill Gross of Pacific Investment Management Co., who popularized the term â€œnew normalâ€ to describe how growth patterns changed after the worst recession since the Great Depression.
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