The United States has begun looking at “moderate to strong” economic growth and the impact of the financial crisis in the country was fading, former U.S. Federal Reserve chairman Ben Bernanke said here on Tuesday.
Addressing a Kotak Mahindra Bank event, Dr. Bernanke took the view that slow recoveries follow financial crises and the U.S. was in one of them. The housing sector was doing better and both activity and sales were up.
Dr. Bernanke said he was also seeing some improvement in Europe and Japan. Also, emerging markets performed better when the U.S. itself was growing, he argued.
Talking about how he dealt with the financial crisis, he said that “orthodoxy may not be the approach when the crisis was severe”.
According to him, the most intense phase of the financial crisis is behind the U.S., but unemployment is still too high. However, the financial system is much safer.
Describing the events of 2008, Dr. Bernanke claimed that all efforts were made to save Lehmann Brothers, but in the end no buyer could be found.
He told a huge gathering at the Jamshed Bhabha Theatre at Nariman Point that handling the crisis was a team effort and somebody had to be the face of the institution at such a time.
On whether the Chinese economy faced a hard landing, Dr. Bernanke said a transition was taking place there and the leadership was trying to encourage domestic demand and consumption.
China, he said, was also trying to liberalise some bits of its financial sector. “They are still on a growth path and that’s good for the world economy.”
Though China had eased off on the purchase of U.S. treasury bonds, the financial crisis had shown that the dollar was still an attractive currency.
To a question on the future of gold and oil, he said gold was a very volatile and hard commodity to predict. Oil, too, was very volatile.
Referring to the growing extraction of shale oil through the use of new fracking technology, Dr. Bernanke pointed out that the U.S. was becoming self-sufficient in oil.
According to him, given that oil is also very sensitive to geo-political risks, the world will have to watch out for issues in the Middle East and Russia.
On whether banks and capital flows would become more national in nature, Dr. Bernanke quipped, quoting a fellow economist as saying: “Banks live globally, but die locally.”