Chancellor George Osborne is to give an update on the state of the economy to Parliament on 29 November.
The autumn statement will follow the release by the Office for Budget Responsibility of its own updated growth forecasts, giving Mr Osborne a chance to respond to the figures.
Mr Osborne has previously said he would scrap the pre-Budget report introduced by Gordon Brown when he was chancellor.
Mr Osborne has already announced the date of the 2011 Budget - on March 23.
The chancellor has said he will end the practice of having a pre-Budget report each autumn.
Under Gordon Brown, this became regarded as a mini-Budget in which draft tax and spending decisions were outlined.
Instead, Mr Osborne will comment on the OBR's latest analysis of the state of the economy, published that day.
The BBC's Business Editor Robert Peston said both MPs and the financial markets will be eager to see the OBR's forecasts for growth and government borrowing to see to what extent the coalition's deficit reduction plan is on track.
Initial estimates published last month suggest the economy grew at a rate of 0.8% between July and September - twice the rate expected by many analysts.
This followed growth of 1.2% in the second quarter of the year
Mr Osborne has said there is a "steady" recovery but Labour has said the cuts announced since the coalition came to power in May could endanger this.
Source: BBC
www.bbc.co.uk
Saturday, November 20, 2010
Sunday, November 14, 2010
Great reforms in principle, quick and painful cuts in practice
Iain Duncan Smith's proposals will take years to make an impact. George Osborne's benefit-slashing will not.
F Scott Fitzgerald believed: "There are no second acts in American lives." In British political lives, there can be. Iain Duncan Smith was the least successful Tory leader in many decades; his contribution to history seemed to be making William Hague and Michael Howard look impressive. At the nadir of the brief and humiliating period when he was nominally in control of the Conservatives, cruel colleagues like to joke that IDS stood for In Deep Shit.
Yet he then reinvented himself as a social campaigner. That second act reached its zenith in the House of Commons on Thursday when he unveiled his white paper on welfare. It was received with a fanfare of headlines and editorials which have hailed him as the cabinet's boldest, bravest and biggest reformer. The much mocked "Quiet Man" has even been compared with Sir William Beveridge, the Liberal founding father of the welfare state. That is hyperbole, but it is flattering hyperbole none the less for a man once so ridiculed.
Why has such a fair wind filled his sails as he embarks on the notoriously treacherous seas of welfare reform? It helps that few question that Mr Duncan Smith is a serious-minded man genuinely moved to try to release people from the welfare dependency which impoverishes those trapped in it and their country. Even those who criticise his means tend to accept that his ends are well-intentioned. Unlike most of the cabinet, the work and pensions secretary has experience of what it is like to be jobless, having suffered a period of redundancy in the 80s. When I interviewed him recently, he spoke passionately about the feelings of rejection and dejection that accompany being made unemployed and told a story about wanting to rip the throat out of a Tory MP whom he heard pontificating about the jobless being work-shy layabouts.
He has also received a generally warm reception because there has been a growing, but until now rather covert, cross-party consensus that welfare dependency is a terrible social and economic sickness. The fundamental problem with benefits in Britain is not that they are lavishly generous. The last government allowed housing benefit to balloon out of control, but on the whole British welfare payments are quite stingy by western European standards. The trouble is that too many people are on benefits. Roughly 5 million working-age Britons are benefit-dependent. Approaching 1.5m of them have been receiving benefits for nine of the last 10 years.
Both Labour and the Tories feel guilt – or certainly ought to – about this national tragedy. The first big surge came under Margaret Thatcher in the 80s, a fact which has been largely overlooked in pieces marking the 20th anniversary of her fall. When unemployment shot up to 3 million, her government tried to make the figures look less horrendous by shunting hundreds of thousands of the jobless on to disability benefits. The long period of prosperity between 1997 and 2007 would have been an ideal time to provide the incentives and training to encourage the jobless to rejoin the world of work. New Labour made some attempts to reform welfare, but the effort was fitful and compromised by divisions at the top of the government. So there is a political market for reform to welfare. There is also a voter one. Polling conducted both before and after Mr Duncan Smith unveiled his plans found majority support favouring his approach.
Responding for Labour, Douglas Alexander has been a model of sensible opposition. He eschewed the temptation to spit venom about the proposals and instead did the smart thing, which is to support many of the general principles of reform while asking pertinent questions about how it is going to work in practice. That keeps Labour with the grain of the public mood while preparing the ground to be critical when and if things go wrong.
Mr Alexander's most salient point is his most obvious one: "Welfare to work requires there to be work." The number of long-term unemployed has more than doubled since 2008 to 800,000. This is not because all those people suddenly decided they would rather stay at home and watch daytime TV. It is because the recession has destroyed their jobs. That is not an argument against change. There is a powerful case for getting on with reform as rapidly as possible so that the currently workless might have a better chance of participating in the economy when the recovery is complete. But Mr Duncan Smith's promise to make work pay cannot be redeemed by those for whom there is no work available. He himself acknowledges that, with the country limping out of a painful recession and the government introducing a severe spending squeeze, this is "a dreadful period to try and do any of this".
Another reason to be cautious is that these reforms have been oversold as a revolution when much of it is a slow-cooking evolution. A lot of misleading headlines have suggested that this is a "year zero" for welfare. The government's propagandists have cleverly exploited two weaknesses of political journalism when it comes to reporting welfare. Most of the Westminster media do not understand the benefit system, which is not surprising when many of those who administer it or draw the benefits get lost in the labyrinth. Newspapers of both left and right are also suckers for stories about "crackdowns" on benefit claimants, the right because they want to applaud assaults on the idle and the left because they want to be outraged by attacks on the defenceless. Some reporting has suggested that Mr Duncan Smith will have every "feckless scrounger" thrown out of bed to join chain gangs picking up litter. In fact, these sort of "workfare" programmes already existed under the previous government, which is one reason you haven't heard Labour condemn them. Requiring people to do a few weeks' labour in return for benefits may have value in reintroducing the long-term jobless to some of the disciplines of work. But experience suggests that these schemes do little to assist the unemployed into real jobs because they don't equip the jobless with the skills that employers want.
The coalition affects to despise all things New Labour, especially its spin. Yet they appear to have been thumbing through an old propaganda manual left behind at Number 10 by its previous occupants. The government's spinners achieved domination of another morning's news coverage with headlines screaming: "Three strikes and you're out": the threat of a new range of tough measures against the work-shy, the most severe of which would penalise those who three times fail to apply for or accept work by removing all their job seeker's allowance for three years. By the end of the very day that those headlines appeared, Nick Clegg was on the airwaves predicting that this sanction would be used only "for a tiny, tiny number of people who really are systematically abusing the system".
Iain Duncan Smith's ambitions to be the great reformer are located in the centrepiece of his proposals. That is to replace many existing benefits with one universal credit. This has huge theoretical attractions because it has the beauty of simplicity. The complex tangle of current benefits encourages fraud and propagates errors. Billions are lost to both: more than £3bn in overpayments and an estimated £1.6bn in fraud last year. Many claimants need a degree in mathematics to work out whether or not they'd be better off in a job. A universal credit ought to reduce confusion and disincentives against working.
The work and pensions secretary is far from the first reformer to have this dream. Those who have gone before him then had nightmares finding a way to do it which did not either cost vast sums of money to introduce or create an angry army of losers. There is a huge number of questions left unanswered by Mr Duncan Smith's white paper, a document with many of the key figures missing. His assertion that there will be "no losers" is just that: an assertion. That can only be true if welfare rolls fall very dramatically or the government spends a lot more than the £2bn allocated to introducing his universal credit.
He has made the very big claim that the long-term effect will be a dramatic reduction in both adult and child poverty. What he can't or won't say when pressed is whether poverty levels will be lower or higher at the end of this parliament than they were at the end of the last one.
His centrepiece reform will only start to be phased in from 2013 and will not have a meaningful impact on significant numbers of people until after the next general election. The changes which will have much more immediate and painful effects are the £18bn of benefit cuts announced in George Osborne's budget and spending review.
In the play that Iain Duncan Smith has written for himself in his head, the fourth act will see him introduce his reforms and the fifth will climax with a standing ovation for the hero who finally cracked welfare dependency. Before any of that can happen, though, he must perform the third act, defending the benefit cuts already scripted by the Treasury.
Source: Guardian
www.www.guardian.co.uk
F Scott Fitzgerald believed: "There are no second acts in American lives." In British political lives, there can be. Iain Duncan Smith was the least successful Tory leader in many decades; his contribution to history seemed to be making William Hague and Michael Howard look impressive. At the nadir of the brief and humiliating period when he was nominally in control of the Conservatives, cruel colleagues like to joke that IDS stood for In Deep Shit.
Yet he then reinvented himself as a social campaigner. That second act reached its zenith in the House of Commons on Thursday when he unveiled his white paper on welfare. It was received with a fanfare of headlines and editorials which have hailed him as the cabinet's boldest, bravest and biggest reformer. The much mocked "Quiet Man" has even been compared with Sir William Beveridge, the Liberal founding father of the welfare state. That is hyperbole, but it is flattering hyperbole none the less for a man once so ridiculed.
Why has such a fair wind filled his sails as he embarks on the notoriously treacherous seas of welfare reform? It helps that few question that Mr Duncan Smith is a serious-minded man genuinely moved to try to release people from the welfare dependency which impoverishes those trapped in it and their country. Even those who criticise his means tend to accept that his ends are well-intentioned. Unlike most of the cabinet, the work and pensions secretary has experience of what it is like to be jobless, having suffered a period of redundancy in the 80s. When I interviewed him recently, he spoke passionately about the feelings of rejection and dejection that accompany being made unemployed and told a story about wanting to rip the throat out of a Tory MP whom he heard pontificating about the jobless being work-shy layabouts.
He has also received a generally warm reception because there has been a growing, but until now rather covert, cross-party consensus that welfare dependency is a terrible social and economic sickness. The fundamental problem with benefits in Britain is not that they are lavishly generous. The last government allowed housing benefit to balloon out of control, but on the whole British welfare payments are quite stingy by western European standards. The trouble is that too many people are on benefits. Roughly 5 million working-age Britons are benefit-dependent. Approaching 1.5m of them have been receiving benefits for nine of the last 10 years.
Both Labour and the Tories feel guilt – or certainly ought to – about this national tragedy. The first big surge came under Margaret Thatcher in the 80s, a fact which has been largely overlooked in pieces marking the 20th anniversary of her fall. When unemployment shot up to 3 million, her government tried to make the figures look less horrendous by shunting hundreds of thousands of the jobless on to disability benefits. The long period of prosperity between 1997 and 2007 would have been an ideal time to provide the incentives and training to encourage the jobless to rejoin the world of work. New Labour made some attempts to reform welfare, but the effort was fitful and compromised by divisions at the top of the government. So there is a political market for reform to welfare. There is also a voter one. Polling conducted both before and after Mr Duncan Smith unveiled his plans found majority support favouring his approach.
Responding for Labour, Douglas Alexander has been a model of sensible opposition. He eschewed the temptation to spit venom about the proposals and instead did the smart thing, which is to support many of the general principles of reform while asking pertinent questions about how it is going to work in practice. That keeps Labour with the grain of the public mood while preparing the ground to be critical when and if things go wrong.
Mr Alexander's most salient point is his most obvious one: "Welfare to work requires there to be work." The number of long-term unemployed has more than doubled since 2008 to 800,000. This is not because all those people suddenly decided they would rather stay at home and watch daytime TV. It is because the recession has destroyed their jobs. That is not an argument against change. There is a powerful case for getting on with reform as rapidly as possible so that the currently workless might have a better chance of participating in the economy when the recovery is complete. But Mr Duncan Smith's promise to make work pay cannot be redeemed by those for whom there is no work available. He himself acknowledges that, with the country limping out of a painful recession and the government introducing a severe spending squeeze, this is "a dreadful period to try and do any of this".
Another reason to be cautious is that these reforms have been oversold as a revolution when much of it is a slow-cooking evolution. A lot of misleading headlines have suggested that this is a "year zero" for welfare. The government's propagandists have cleverly exploited two weaknesses of political journalism when it comes to reporting welfare. Most of the Westminster media do not understand the benefit system, which is not surprising when many of those who administer it or draw the benefits get lost in the labyrinth. Newspapers of both left and right are also suckers for stories about "crackdowns" on benefit claimants, the right because they want to applaud assaults on the idle and the left because they want to be outraged by attacks on the defenceless. Some reporting has suggested that Mr Duncan Smith will have every "feckless scrounger" thrown out of bed to join chain gangs picking up litter. In fact, these sort of "workfare" programmes already existed under the previous government, which is one reason you haven't heard Labour condemn them. Requiring people to do a few weeks' labour in return for benefits may have value in reintroducing the long-term jobless to some of the disciplines of work. But experience suggests that these schemes do little to assist the unemployed into real jobs because they don't equip the jobless with the skills that employers want.
The coalition affects to despise all things New Labour, especially its spin. Yet they appear to have been thumbing through an old propaganda manual left behind at Number 10 by its previous occupants. The government's spinners achieved domination of another morning's news coverage with headlines screaming: "Three strikes and you're out": the threat of a new range of tough measures against the work-shy, the most severe of which would penalise those who three times fail to apply for or accept work by removing all their job seeker's allowance for three years. By the end of the very day that those headlines appeared, Nick Clegg was on the airwaves predicting that this sanction would be used only "for a tiny, tiny number of people who really are systematically abusing the system".
Iain Duncan Smith's ambitions to be the great reformer are located in the centrepiece of his proposals. That is to replace many existing benefits with one universal credit. This has huge theoretical attractions because it has the beauty of simplicity. The complex tangle of current benefits encourages fraud and propagates errors. Billions are lost to both: more than £3bn in overpayments and an estimated £1.6bn in fraud last year. Many claimants need a degree in mathematics to work out whether or not they'd be better off in a job. A universal credit ought to reduce confusion and disincentives against working.
The work and pensions secretary is far from the first reformer to have this dream. Those who have gone before him then had nightmares finding a way to do it which did not either cost vast sums of money to introduce or create an angry army of losers. There is a huge number of questions left unanswered by Mr Duncan Smith's white paper, a document with many of the key figures missing. His assertion that there will be "no losers" is just that: an assertion. That can only be true if welfare rolls fall very dramatically or the government spends a lot more than the £2bn allocated to introducing his universal credit.
He has made the very big claim that the long-term effect will be a dramatic reduction in both adult and child poverty. What he can't or won't say when pressed is whether poverty levels will be lower or higher at the end of this parliament than they were at the end of the last one.
His centrepiece reform will only start to be phased in from 2013 and will not have a meaningful impact on significant numbers of people until after the next general election. The changes which will have much more immediate and painful effects are the £18bn of benefit cuts announced in George Osborne's budget and spending review.
In the play that Iain Duncan Smith has written for himself in his head, the fourth act will see him introduce his reforms and the fifth will climax with a standing ovation for the hero who finally cracked welfare dependency. Before any of that can happen, though, he must perform the third act, defending the benefit cuts already scripted by the Treasury.
Source: Guardian
www.www.guardian.co.uk
Saturday, November 13, 2010
Ireland 'in preliminary talks with EU on bailout'
he Republic of Ireland is in preliminary talks with EU officials for financial support, the BBC has learned.
It is now no longer a matter of whether but when the Irish government formally approaches the European Financial Stability Fund (EFSF) for a bailout, correspondents say.
The provisional estimate for EFSF loans is believed to lie between 60bn and 80bn euros ($82-110bn; £51-68bn).
Dublin says there are no talks on an application for emergency EU funding.
A spokesman for Ireland's department of finance said the country was funded until the middle of 2011, the public-service RTE broadcaster reported.
RTE had earlier said talks had been held on how a bail-out might happen in a theoretical worst-case scenario.
The European Commission would not formally comment on the matter.
Eurozone officials told the Reuters news agency on Friday that discussions were under way, with one saying that it was "very likely" Ireland would receive financial assistance.
The head of the International Monetary Fund (IMF), Dominique Strauss-Kahn, said on Saturday that it had not been asked for aid.
"So far I have not had a request, and I think Ireland can manage well," he told reporters at the Apec summit in Yokohama.
The IMF and EU had to step in with a 110bn-euro bailout package for Greece in May, sparking a Europe-wide sovereign debt crisis.
BBC business correspondent Joe Lynam says any bailout would not be agreed this weekend, but might though come as early as next month.
A meeting of the Eurogroup, composed of the EU member states whose currency is the euro, is scheduled for 6 December.
The Economic and Financial Affairs Council (Ecofin) - comprising the economics and finance ministers of eurozone countries - will gather the following day.
Lastly, the full European Council is to meet on 16 and 17 December.
By-election
Since 2008, Ireland has suffered the worst property collapse of all developed economies, with house values falling between 50% and 60%.
Our correspondent says the Irish government has also all but nationalised the country's banking system, which had lent recklessly at an estimated cost of 40bn to 50bn euros.
The country has promised the EU it will bring its underlying deficit down from 12% of economic output to 3% by 2014. Its current deficit is an unprecedented 32% of gross domestic product, if the one-off cost of bad debts in the Irish banking system is included.
The Irish government, which has a flimsy majority in parliament, is set to publish another draconian budget on 7 December, which will make spending cuts or tax rises totalling 6bn euros, and aims to bring the deficit down to between 9.5-9.75% next year, he adds.
That parliamentary majority is likely to be cut to only two on 25 November, when a by-election will be held that the governing Fianna Fail party is likely to lose.
The government had left the Donegal South West seat empty for 17 months but the Republic's second-highest court recently ruled that the delay was unreasonable. Three other by-elections are also required.
Investors fear the budget cuts are likely to worsen the country's already deep recession, leading to further losses to the government via falling tax revenues and higher benefit payments.
Source: BBC
www.bbc.co.uk
It is now no longer a matter of whether but when the Irish government formally approaches the European Financial Stability Fund (EFSF) for a bailout, correspondents say.
The provisional estimate for EFSF loans is believed to lie between 60bn and 80bn euros ($82-110bn; £51-68bn).
Dublin says there are no talks on an application for emergency EU funding.
A spokesman for Ireland's department of finance said the country was funded until the middle of 2011, the public-service RTE broadcaster reported.
RTE had earlier said talks had been held on how a bail-out might happen in a theoretical worst-case scenario.
The European Commission would not formally comment on the matter.
Eurozone officials told the Reuters news agency on Friday that discussions were under way, with one saying that it was "very likely" Ireland would receive financial assistance.
The head of the International Monetary Fund (IMF), Dominique Strauss-Kahn, said on Saturday that it had not been asked for aid.
"So far I have not had a request, and I think Ireland can manage well," he told reporters at the Apec summit in Yokohama.
The IMF and EU had to step in with a 110bn-euro bailout package for Greece in May, sparking a Europe-wide sovereign debt crisis.
BBC business correspondent Joe Lynam says any bailout would not be agreed this weekend, but might though come as early as next month.
A meeting of the Eurogroup, composed of the EU member states whose currency is the euro, is scheduled for 6 December.
The Economic and Financial Affairs Council (Ecofin) - comprising the economics and finance ministers of eurozone countries - will gather the following day.
Lastly, the full European Council is to meet on 16 and 17 December.
By-election
Since 2008, Ireland has suffered the worst property collapse of all developed economies, with house values falling between 50% and 60%.
Our correspondent says the Irish government has also all but nationalised the country's banking system, which had lent recklessly at an estimated cost of 40bn to 50bn euros.
The country has promised the EU it will bring its underlying deficit down from 12% of economic output to 3% by 2014. Its current deficit is an unprecedented 32% of gross domestic product, if the one-off cost of bad debts in the Irish banking system is included.
The Irish government, which has a flimsy majority in parliament, is set to publish another draconian budget on 7 December, which will make spending cuts or tax rises totalling 6bn euros, and aims to bring the deficit down to between 9.5-9.75% next year, he adds.
That parliamentary majority is likely to be cut to only two on 25 November, when a by-election will be held that the governing Fianna Fail party is likely to lose.
The government had left the Donegal South West seat empty for 17 months but the Republic's second-highest court recently ruled that the delay was unreasonable. Three other by-elections are also required.
Investors fear the budget cuts are likely to worsen the country's already deep recession, leading to further losses to the government via falling tax revenues and higher benefit payments.
Source: BBC
www.bbc.co.uk
Monday, November 08, 2010
EU visits Dublin as worries mount
Meanwhile financial markets increasingly fear the government will default on its debts, with Irish bond yields hitting new record highs.
The Irish parliament will vote in December on the budget.
The country has promised the EU it will bring its underlying deficit down from 12% of economic output to 3% by 2014.
The Irish Republic's current deficit is an unprecedented 32% of gross domestic product, if the one-off cost of bad debts in the state-guaranteed Irish banking system is included.
The draft budget will include a record 6bn euros (£5.2bn, $8.4bn) of spending cuts, and aims to bring the deficit down to between 9.5-9.75% next year.
Full details of the budget - which needs the EU's endorsement - will be published on 7 December.
Unreasonable delay
However, concerns are mounting that the Dail may not pass the budget.
The opposition Fine Gael party, while agreeing that the budget needs to be brought under control, has said it does not plan to support the budget because it has no confidence in the government.
The government has delayed four by-elections to the parliament, which have the potential to deprive it of its majority of just three seats.
After a ruling by the Republic's second-highest court, the government has agreed to hold the longest-delayed by-election on 25 November.
The Donegal South seat has remained vacant for 17 months, which in the court's opinion is an unreasonable delay.
However, the government said it would not hold the other three elections until the Irish supreme court had heard its appeal against the lower court's ruling.
Buyers' strike
Whether or not the budget passes, markets are increasingly concerned that Dublin will find its debt trap impossible to escape from.
Investors fear that the budget cuts are likely to worsen the country's already deep recession, leading to further losses to the government via falling tax revenues and higher benefit payments.
And there is concern that there may be more big write-downs of bad debts to come from the Irish banking system.
Writing in the Irish Times, economist Morgan Kelly of University College, Dublin, warned that losses at the other state-guaranteed banks could more than equal the approximately 30bn euros that the Irish government has already suffered at Anglo Irish Bank.
The annual yield on the Irish Republic's benchmark 10-year bond hit a record high of 7.84% on Monday, as investors demanded a higher return to compensate them for the risk of a debt default.
The difference in yield between the Irish bond and its German counterpart - which measures their relative riskiness - also hit a new high of 5.56%.
Some investors warned that the Irish government may face a "buyers' strike" by bond investors when it next needs to borrow from the market by the middle of next year.
If so, the Irish Republic may have to turn to the EU's new sovereign bail-out fund.
Source:BBC
www.bbc.com
The Irish parliament will vote in December on the budget.
The country has promised the EU it will bring its underlying deficit down from 12% of economic output to 3% by 2014.
The Irish Republic's current deficit is an unprecedented 32% of gross domestic product, if the one-off cost of bad debts in the state-guaranteed Irish banking system is included.
The draft budget will include a record 6bn euros (£5.2bn, $8.4bn) of spending cuts, and aims to bring the deficit down to between 9.5-9.75% next year.
Full details of the budget - which needs the EU's endorsement - will be published on 7 December.
Unreasonable delay
However, concerns are mounting that the Dail may not pass the budget.
The opposition Fine Gael party, while agreeing that the budget needs to be brought under control, has said it does not plan to support the budget because it has no confidence in the government.
The government has delayed four by-elections to the parliament, which have the potential to deprive it of its majority of just three seats.
After a ruling by the Republic's second-highest court, the government has agreed to hold the longest-delayed by-election on 25 November.
The Donegal South seat has remained vacant for 17 months, which in the court's opinion is an unreasonable delay.
However, the government said it would not hold the other three elections until the Irish supreme court had heard its appeal against the lower court's ruling.
Buyers' strike
Whether or not the budget passes, markets are increasingly concerned that Dublin will find its debt trap impossible to escape from.
Investors fear that the budget cuts are likely to worsen the country's already deep recession, leading to further losses to the government via falling tax revenues and higher benefit payments.
And there is concern that there may be more big write-downs of bad debts to come from the Irish banking system.
Writing in the Irish Times, economist Morgan Kelly of University College, Dublin, warned that losses at the other state-guaranteed banks could more than equal the approximately 30bn euros that the Irish government has already suffered at Anglo Irish Bank.
The annual yield on the Irish Republic's benchmark 10-year bond hit a record high of 7.84% on Monday, as investors demanded a higher return to compensate them for the risk of a debt default.
The difference in yield between the Irish bond and its German counterpart - which measures their relative riskiness - also hit a new high of 5.56%.
Some investors warned that the Irish government may face a "buyers' strike" by bond investors when it next needs to borrow from the market by the middle of next year.
If so, the Irish Republic may have to turn to the EU's new sovereign bail-out fund.
Source:BBC
www.bbc.com
Sunday, November 07, 2010
Fed's Bernanke defends new economic recovery plan
US Federal Reserve Chairman Ben Bernanke has backed the the central bank's new $600bn (£371bn) package to boost the economy.
And he has rejected fears that it may spur inflation.
Some Fed officials worry the money being pumped into the economy could create inflation or speculative bubbles in the prices of bonds or commodities.
But Mr Bernanke says the programme, unveiled on Wednesday, will not push inflation to "super ordinary" levels.
Criticism
Germany, China, Brazil and South Africa have criticised the US plan, with the German Finance Minister Wolfgang Schaeuble saying it was "clueless" and would create "extra problems for the world".
China's Central Bank head Zhou Xiaochuan has urged global currency reforms, while South Africa said developing countries would suffer most.
South Africa's finance minister Pravin Gordhan warned that "developing countries, including South Africa, would bear the brunt of the US decision to open its flood gates without due consideration of the consequences for other nations."
The US policy "undermines the spirit of multilateral co-operation that G20 leaders have fought so hard to maintain during the current crisis," he said.
The heads of state and government of the G20 group of the world's leading nations is due to meet in a week in South Korea, with currencies and trade imbalances high on the agenda.
Dual mandate
"We're not in the business of trying to create inflation, our purpose is to provide additional stimulus to help the economy recover and to avoid potentially additional disinflation, which I think we all agree could also be worrisome," Mr Bernanke said at the weekend.
He said the Fed was bound by a dual mandate for low and stable prices and firm employment, and by a duty to support the economy.
"We are committed to our price stability objective," said Mr Bernanke.
"I have rejected any notion that we are going to raise inflation to a supra-normal level.
"We've had a very significant disinflation since the beginning of the crisis. We should not be satisfied with a situation where we have both a large amount of slack on the employment side and inflation which is below our generally agreed upon level and seems to be declining over time."
That, he said, was the motivation for taking the action which will see the Fed buy $600bn worth of government bonds in a bid to make loans cheaper and get Americans to spend more.
Source:BBC
www.bbc.com
And he has rejected fears that it may spur inflation.
Some Fed officials worry the money being pumped into the economy could create inflation or speculative bubbles in the prices of bonds or commodities.
But Mr Bernanke says the programme, unveiled on Wednesday, will not push inflation to "super ordinary" levels.
Criticism
Germany, China, Brazil and South Africa have criticised the US plan, with the German Finance Minister Wolfgang Schaeuble saying it was "clueless" and would create "extra problems for the world".
China's Central Bank head Zhou Xiaochuan has urged global currency reforms, while South Africa said developing countries would suffer most.
South Africa's finance minister Pravin Gordhan warned that "developing countries, including South Africa, would bear the brunt of the US decision to open its flood gates without due consideration of the consequences for other nations."
The US policy "undermines the spirit of multilateral co-operation that G20 leaders have fought so hard to maintain during the current crisis," he said.
The heads of state and government of the G20 group of the world's leading nations is due to meet in a week in South Korea, with currencies and trade imbalances high on the agenda.
Dual mandate
"We're not in the business of trying to create inflation, our purpose is to provide additional stimulus to help the economy recover and to avoid potentially additional disinflation, which I think we all agree could also be worrisome," Mr Bernanke said at the weekend.
He said the Fed was bound by a dual mandate for low and stable prices and firm employment, and by a duty to support the economy.
"We are committed to our price stability objective," said Mr Bernanke.
"I have rejected any notion that we are going to raise inflation to a supra-normal level.
"We've had a very significant disinflation since the beginning of the crisis. We should not be satisfied with a situation where we have both a large amount of slack on the employment side and inflation which is below our generally agreed upon level and seems to be declining over time."
That, he said, was the motivation for taking the action which will see the Fed buy $600bn worth of government bonds in a bid to make loans cheaper and get Americans to spend more.
Source:BBC
www.bbc.com
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