WASHINGTON — China’s slowing economy and ailing commodity markets are the biggest threats to an otherwise healthy U.S. economy, Former Federal Reserve chairman Ben Bernanke said Wednesday. He also pushed back against a movement to “audit” the Fed.
Bernanke, speaking at an event hosted by the Economic Club of Washington, said that the economy has largely recovered internally—unemployment is down, markets have picked up, the housing market is improving. But “external” threats from overseas still pose a threat.
He said turbulence in the Chinese economy could cause trouble. China has devalued its currency in the past months, driving down the prices of its exports and undercutting other export-driven economies.
In addition, Bernanke said low commodity prices are concerning. The price of a barrel of oil has fallen roughly 70 percent in the past 18 months.
“Overall, though, you have a domestic economy that is moving forward and creating jobs,” he said.
Current Fed chair Janet Yellen gave her biannual report to Congress today. Like Bernanke, she pointed out recent improvement in the domestic economy, especially in the labor market. But she also acknowledged the trouble China could potentially cause.
“As is always the case, the economic outlook is uncertain,” she said. “Foreign economic developments, in particular, pose risks to U.S. economic growth.”
Bernanke also criticized a movement among conservatives to “audit” the Fed. Rand Paul, the Kentucky senator who recently dropped out of the presidential race, is a leading proponent of an audit, which would allow Congress to examine transcripts from the Fed’s deliberations about monetary policy.
Bernanke said the movement is not actually about “auditing” the Fed, but instead Congress taking power back from the Federal Reserve.
“If you like the way Congress runs fiscal policy,” Bernanke joked, “why don’t you put them in charge of monetary policy?”
The Senate rejected Paul’s proposal in January.
Paul said he wanted to reign in the Fed’s “unchecked power.”
“The Federal Reserve has the ability to create new money and spend it on whatever financial assets it wants, whenever it wants, while giving the new money to whichever banks it wants,” Paul told the Associated Press. “Low-income workers do not get the luxury of receiving the Fed’s newly created money first, nor do they do have the luxury of receiving the near-zero interest rates that the wealthy do.”
Bernanke served as chairman from 2006 to 2014, through the worst of the financial crisis.