Wednesday, June 04, 2008

Remarks on Class Day 2008 by FED Chairman Ben S. Bernanke

I will focus my remarks today on two economic issues that challenged us in the 1970s and that still do so today--energy and productivity. These, obviously, are not the kind of topics chosen by many recent Class Day speakers--Will Farrell, Ali G, or Seth MacFarlane, to name a few. But, then, the Class Marshals presumably knew what they were getting when they invited an economist.

Interesting speech and good insight into the current mind set at the FED.

Follow the link in the clip for the full text of the speech.

The oil price shock of the 1970s began in October 1973 when, in response to the Yom Kippur War, Arab oil producers imposed an embargo on exports. Before the embargo, in 1972, the price of imported oil was about $3.20 per barrel; by 1975, the average price was nearly $14 per barrel, more than four times greater. President Nixon had imposed economy-wide controls on wages and prices in 1971, including prices of petroleum products; in November 1973, in the wake of the embargo, the President placed additional controls on petroleum prices.2

In addition to creating long lines at gasoline stations, the oil price shock exacerbated what was already an intensifying buildup of inflation and inflation expectations. In another echo of today, the inflationary situation was further worsened by rapidly rising prices of agricultural products and other commodities.

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