Tuesday, October 16, 2007

The Recent Financial Turmoil and its Economic and Policy Consequences

Yesterday on Monday, October 15 Federal Reserve Chairman, Ben Bernanke, gave a speech that seemed to scare stock markets throughout the world. In his speech to the Economic Club of New York Bernanke seemed much more nervous about problems in the housing market than in previous speeches, calling the housing slump a “significant drag” on growth into next year, and the outlook for the economy “uncertain.” Bernanke tried to assure the financial markets that the Fed will “act as needed” to maintain economic growth. You will be learning a lot more about the Federal Reserve System and monetary policy when we cover Chapter 13 in your text. You can watch the video of the Bernanke speech about the current state of the economy on Bloomberg or read the transcript here.
Speaking of the Fed last week Bernake gave an important speech the US Chamber Education and Workforce Summit. In this speech Chairman Bernake spoke about the value of education, calling it the “best investment.” He stated, “the benefits of education are more than economic. A substantial body of evidence demonstrates that more-highly-educated individuals are happier on average, make better personal financial decisions, suffer fewer spells of unemployment, and enjoy better health.”

Bernanke starts his education speech by saying: When I travel around the country, meeting with students, business people, and others interested in the economy, I am occasionally asked for investment advice. Usually (though not always) the question is posed in jest. No one really expects me to tell them which three stocks they should buy. However, I know the answer to the question and I will share it with you today: Education is the best investment. “

You can Read Bernake’s education speech online at :http://www.federalreserve.gov/newsevents/speech/bernanke20070924a.htm

Examining the role of education in economic growth would be a worthwhile topic for your post, and might serve to keep you motivated to do well in the course.

Fall Late Start Extra Credit: Where did Ben Bernanke teach economics before becoming Chair of the Federal Reserve? What was Bernanke’s main area of research when he was an academic? Explain and cite your source. If you are the Fall late start student to send me an e-mail at kwoodward@saddleback.edu with the answer, you will be rewarded with two extra credit Discussion Board points. Only one blog extra credit question per student can be answered in any given week for Discussion Board extra credit

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