Fed Chairman Ben Bernanke all but pleads for resolution to fiscal cliff

During a speech given to the Economic Club of New York, a gathering of leading American finance economists, government officials and company executives, Federal Reserve Chairman Ben Bernanke issued a stern warning to U.S. politicians regarding the fiscal cliff, but at the same time appealed to both political parties for resolution to the crisis.

Calling the fiscal cliff a "substantial threat," Bernanke conceded that the central bank's toolkit of monetary policies was beginning to lose its effectiveness after several years of on-and-off quantitative easing. This process, which has seen the Federal Reserve swell its balance sheets with mortgage-backed securities and U.S. Treasury bonds, has been attacked by both the left and right as a contributing factor to the ailing economy. Some economists, however, argue that Bernanke's actions have kept the system together while politicians squabble over fiscal policy.

"There's important potential for the economy to strengthen significantly if there's a greater level of security and confidence about where we're going," he told the Economic Club attendees. "A plan for resolving the nation's longer-term budgetary issues without harming the recovery could help make the new year a very good one for the American economy."

Still, Bernanke stated firmly that the Fed will continue to "remain accommodative" in regards its actions in U.S. bond markets until its dual mandate – price stability and full employment – is fulfilled. By continuing its support, the Fed could provide time for Democrats and Republicans to put together some form of fiscal cliff deal that will avert the potentially economy-crushing tax hikes and spending cuts that will kick in at the beginning of January.

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