Bernanke Says Financial Education Boosts Economy
Federal Reserve Chairman Ben S. Bernanke said financial education and planning boost the economy, and students who learn those skills are likely to save more later in life and better weather market turbulence.
“Financial education supports not only individual well- being, but also the economic health of our nation,” Bernanke said today in remarks prepared for a town hall meeting with teachers at the Fed in Washington. “Consumers who can make informed decisions about financial products and services not only serve their own best interests, but, collectively, they also help promote broader economic stability.”
Financial education “can play a key role” in promoting financial planning such as budgeting and saving for emergencies and retirement, which help households live better and be better positioned to handle financial shocks, said Bernanke, a former Princeton University professor whose wife, Anna, is a teacher.
Responding to questions from teachers, Bernanke said the Fed has been keeping interest rates near zero to support the U.S. economic recovery.
“They are low for a good reason, which is that our economy is still in a fragile recovery,” he said. The Fed is trying “to restore more normal levels of employment and growth.”
In his written remarks, Bernanke didn’t expand on the Fed’s Aug. 1 statement that it will increase stimulus if necessary to boost growth and cut a jobless rate stuck above 8 percent since February 2009, nor did he address the outlook for monetary policy or the economy. The 58-year-old Fed chief spoke to teachers at the Fed and by video link to those gathered at regional reserve banks.
Students today face a brighter future than their parents, Bernanke said in the question period. The U.S. has been a leader in technology, and rising productivity has been the key to boosting living standards over time, he said.
In addition, a “very healthy immigration rate” and a “healthy fertility rate” are giving the U.S. more favorable “demographics” than other industrialized countries, Bernanke said.
“There are certainly some very important challenges” including “fiscal challenges” and education, the Fed chairman said.
“In the near term, of course, kids coming out of high school or college right now are not facing a particularly good job market,” he said.
Bernanke also said the European debt crisis was resulting in the region having a “much weaker economy” that is hurting global growth. “This is one of the factors that’s slowing the economic recovery,” he said.
The Federal Open Market Committee said Aug. 1 that it “will provide additional accommodation as needed to promote a stronger economic recovery and sustained improvement in labor market conditions” after the world’s largest economy has “decelerated somewhat,” according to the statement. The Fed also will continue swapping $667 billion of short-term debt with longer-term securities, an action dubbed Operation Twist.
Growth cooled to a 1.5 percent annual pace in the second quarter. Policy makers next meet Sept. 12-13 in Washington.
The U.S. economy generated more jobs than forecast in July, easing concern the three-year expansion is faltering, even as the unemployment rate unexpectedly rose to a five-month high of 8.3 percent. The payrolls increase of 163,000 followed a revised 64,000 gain in June, the Labor Department said Aug. 3.
U.S. banks are relaxing their terms on credit cards and lending for autos and commercial real estate, according to the Fed. Banks report “having eased their lending standards across most loan types over the past three months,” the Fed said yesterday in its quarterly survey of senior loan officers.
Banks in the U.S. are lending the most since the recession ended in June 2009, supporting growth dragged down by unemployment. Borrowing by consumers and businesses rose in the week ended July 25 to $7.1 trillion, within 2.9 percent of its October 2008 peak, according to Fed data.
Bernanke said July 24 that early childhood education is “crucial” and that effective schooling supports the economy by reducing poverty and boosting wages. Educational attainment is “a key source of economic growth and rising incomes” in many countries, Bernanke said by video to the Children’s Defense Fund national conference in Cincinnati.
Bernanke said yesterday that economic indicators may fail to measure the suffering of individuals. While consumer spending, disposable income and household net worth have rebounded, “individuals and households continue to struggle with difficult economic and financial conditions,” Bernanke said at a conference in Cambridge, Massachusetts.
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