US Federal Reserve chairman Ben Bernanke said yesterday that he is ‘ready to act’ on the US economy, hinting that the US is about to print hundreds of billions more dollars to be handed over to the banks.
He also warned of the danger from the collapsing Eurozone saying: ‘The stronger our economy, the better we will be able to withstand a financial spillover from problems in Europe.’
Bernanke, giving testimony to the US Congress, warned that the Eurozone crisis posed huge risks for the US economy.
Earlier on Wednesday his vice-chairman, Janey Yellen, pointed to a list of major weaknesses in the US economy.
These included continuing record housing repossessions and a very weak jobs growth, too weak to ensure the re-election of President Obama in November.
Bernanke admitted that employment growth is the key issue and that the rest of the Fed’s Open Markets’ Committee (FOMC), which meets regularly to decide on monetary policy, will be looking at job creation.
He also said he expected inflation to stay at or slightly below the 2% target set by the Federal Reserve.
Bernanke also issued a warning about the so-called ‘fiscal cliff’ legislation.
He said this could force a steep cut in government spending and higher taxes, a move that could drive unemployment up and sink Obama’s re-election campaign.
In a separate move, the ratings agency Fitch warned that if the US did not sort out its own budget deficit, which Mr Bernanke said in his speech had been averaging 9% over the past three years, it risked a cut in its top AAA rating.
Meanwhile the news from France was bad.
The Bank of France now expects the French economy to contract by 0.1% between April and June this year, having predicted that there would be zero growth less than a month ago.
The German central bank could only forecast a puny 0.4% growth to 1% in the German economy.
Earlier this week, the latest set of official figures confirmed the Eurozone economy achieved zero growth in the first three months of 2012.
Also on Friday, Spain again had to deny that it was about to ask for bailout funds to support its banking system, but everyone knows that it will need up to 100bn euros!
The French banks are holding tens of billions of euros of Spanish debt, and fear the worst.
On Thursday, official figures showed that French unemployment had hit 10% in the first quarter of 2012.